Stock mar­ket slide puts car sales in re­verse

China Daily (Canada) - - FRONT PAGE - By BLOOMBERG

Au­tomak­ers in China are find­ing them­selves in a “loselose sit­u­a­tion” af­ter a world­beat­ing stock mar­ket boom that di­verted funds away from buy­ing new mod­els turned into a bust.

This has fur­ther dented de­mand in the world’s largest car mar­ket as the coun­try’s eco­nomic growth slows.

Pas­sen­ger-ve­hi­cle sales fell for the first time in more than two years as tum­bling stock prices dented con­sumer sen­ti­ment.

Re­tail de­liv­er­ies of cars, mul­ti­pur­pose ve­hi­cles and sport util­ity ve­hi­cles fell 3.2 per­cent in June from a year ear­lier to 1.43 mil­lion units, the China Pas­sen­ger Car As­so­ci­a­tion said on Wed­nes­day on its web­site. Sales last fell in Fe­bru­ary 2013.

An­in­creas­ingnum­berof car buy­ers are can­cel­ing their pur­chases and los­ing their down pay­ments af­ter the stock mar­ket dip erased about $3.2 tril­lion in value, ac­cord­ing to Cui Dong­shu, sec­re­tary-gen­eral of the as­so­ci­a­tion.

“The plung­ing stock mar­ket is es­sen­tially a meat grinder, shred­ding money meant for buy­ing cars,” Cui said.

The rapid fall in the mar­ket, which saw the Shang­hai Com­pos­ite In­dex dive more than 30 per­cent since June 12, is deal­ing another blow to auto de­mand al­ready slow­ing with the econ­omy.

Deal­ers who re­ported soft­en­ing de­mand as prospec­tive buy­ers post­poned their pur­chases dur­ing the rally to in­vest on eq­ui­ties now face the prospect of lost sales in the en­su­ing plunge.

“The stock mar­ket is go­ing down too fast, this is wealth de­struc­tion,” said Song Yang, a Hong Kong-based an­a­lyst at Bar­clays Plc.

“If you’re los­ing so much money in the stock mar­ket, that damp­ens your de­sire to buy a car.”

Au­tomak­ers, in­clud­ing Volk­swa­gen AG and Gen­eral Mo­tors Co, which count China as their largest mar­ket, have cut prices to de­fend their mar­ket share as de­mand slows and do­mes­tic ri­vals lure in­creas­ingly value-con­scious cus­tomers with cheaper SUVs. But that has done lit­tle to spur de­mand.

In­ven­to­ries have been at lev­els that in­di­cate low mar­ket de­mand for nine con­sec­u­tive months, with June’s read­ing at the sec­ond-high­est mark for this year, data from the China Au­to­mo­bile Deal­ers As­so­ci­a­tion show.

Weak car de­mand is not ex­pected to re­cover be­fore Septem­ber, ac­cord­ing to Cui, who also said it is un­likely for the gov­ern­ment to roll out any pol­icy in­cen­tives to help spur ve­hi­cle de­mand in the near fu­ture.

John Zeng, the Shang­haibased man­ag­ing di­rec­tor at re­searcher LMC Automotive, is strug­gling to be up­beat in the short term.

“Judg­ing from the mo­men­tum, the sec­ond half is not look­ing too op­ti­mistic,” he said. “The growth slow­down will con­tinue. Au­tomak­ers will be more cau­tious in terms of pro­duc­tion.”

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