China passenger car sales fall on economy, market woes

Retail deliveries of cars, multipurpose vehicles and SUVs fell 3.2 percent in June from a year earlier to 1.43 million units, the China Passenger auto Association said today on its website.

The China Association of Automobile Manufacturers (CAAM) had earlier projected growth of combined sales of passenger and commercial vehicles at 7 per cent to 25.1 million this year, as against 6.9 per cent in 2014. America’s GM and Germany’s Volkswagen AG were among the first global automakers to profit handsomely from setting up joint ventures – GM now counts on China as the main market around the world and Ford – a late comer in the war – already has half of North American sales.

For the first six months of 2015, auto sales were up 4.8% over that same period during 2014, the weakest performance in the market in the past six years. On Friday, the association cut the forecast to only 3%.

Automakers are facing headwinds including the slowest Chinese economy in a quarter century, a corruption crackdown which is weighing on sales of flashy cars, and a stock market slide that has squeezed the net worth of some potential buyers. “Our surveys of dealers show that visiting volumes to vehicle showrooms dropped sharply in the first-half”, said Mr. Dong.

“Neither a bull market nor bear market does good to auto sales”. The growth of vehicle sales had been trending downward steadily over much of the past year in spite of the soaring equity markets, from a growth of 10.4% during January to just 1.2% during May.

Dong Yang, secretary general of CAAM, said the market would probably recover a little in the second half of the year if the stock market stabilised. The Shanghai Composite is now off almost a quarter from its mid-June high, though stocks have staged a recovery over the past two days thanks to government intervention. Sales of sedans, the biggest category, fell 3 per cent.

Bloomberg cited LMC Automotive researcher John Zeng as saying the growth slowdown will continue, and automakers will be more cautious.

“I don’t think you can imagine very strong growth in the market”, BMI Research London-based head of auto analysis Anna-Marie Baisden said.