Auto mar­ket set for con­trac­tion

Au­gust sales in China down 3 per­cent on yearly ba­sis de­spite 10.7 per­cent rise from July, re­port says

China Daily (Canada) - - SHANGHAI - By YU RAN in Shang­hai


China’s auto mar­ket is ex­pected to ex­pe­ri­ence low sin­gle-digit growth as well as a pos­si­ble con­trac­tion in the sec­ond half of this year, ac­cord­ing to the China Auto Out­look which was re­leased by Alix Part­ners and the Amer­i­can Cham­ber of Com­merce (AmCham) in Shang­hai.

The out­look com­prises anal­y­sis of orig­i­nal equip­ment man­u­fac­tur­ers (OEM) and auto sup­pli­ers who are mem­bers of AmCham Shang­hai, and a sur­vey of se­nior ex­ec­u­tives of lead­ing do­mes­tic and in­ter­na­tional auto-part mak­ers in China.

The re­port showed that signs of lower ca­pac­ity uti­liza­tion are emerg­ing, a re­sult of in­creased pric­ing com­pe­ti­tion when com­bined with flat sales. Ac­cord­ing to the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers, China’s auto sales in Au­gust (1.66 mil­lion units) were still down 3 per­cent on a yearly ba­sis, de­spite a 10.7 per­cent re­bound from the pre­vi­ous month. In­dus­try ex­perts said that it will be dif­fi­cult to achieve the tar­get of 3 per­cent growth, which was al­ready re­vised from the orig­i­nal 7 per­cent in July.

The re­port also warned global OEMs that the China mar­ket may prove dis­ap­point­ing for them as their do­mes­tic ri­vals have started re­cap­tur­ing lost mar­ket share, re­vers­ing a fouryear trend. How­ever, used-car sales are grow­ing quickly, chang­ing the mar­ket dy­nam­ics for OEMs, parts sup­pli­ers and deal­ers.

“To re­store growth and prof­itabil­ity, Chi­nese auto deal­ers must con­sider sev­eral strate­gic ac­tions to adapt to changes in the mar­ket. They need to im­prove cus­tomer ex­pe­ri­ences, strengthen af­ter­mar­ket ser­vices and ex­plore auto fi­nanc­ing op­por­tu­ni­ties,” said Lian Hoon Lim, man­ag­ing di­rec­tor of Alix Part­ners.

Au­to­mo­bile sales in China grew at a com­pound an­nual growth rate (CAGR) of 24 per­cent from 2002 to 2010 af­ter the coun­try joined the World Trade Or­ga­ni­za­tion in late 2001. China be­came the largest au­to­mo­bile mar­ket in the world in 2009 and has since held on to that po­si­tion. Nearly ev­ery global au­tomaker has a pres­ence in China and the coun­try’s ve­hi­cle pop­u­la­tion is pro­jected to hit 270 mil­lion by 2020.

A con­sid­er­able por­tion of the au­to­mo­bile pop­u­la­tion in the fu­ture is ex­pected to be formed by ve­hi­cles that run on al­ter­na­tive energy sources. In 2012, the State Coun­cil set a goal of putting 500,000 newen­ergy cars on the road by the end of this 2015, and 5 mil­lion by 2020. To achieve this, the gov­ern­ment is plan­ning to es­tab­lish a re­search and de­vel­op­ment sys­tem and in­dus­trial chain for e-cars within the next four years.

“Energy ef­fi­ciency and new energy used in ve­hi­cles have been em­pha­sized by the cen­tral gov­ern­ment, ow­ing to the aware­ness of en­vi­ron­men­tal pro­tec­tion and the need for sus­tain­able de­vel­op­ment,” said Zhao Fuquan, pro­fes­sor and di­rec­tor of the Automotive Strat­egy Re­search In­sti­tute at Ts­inghua Univer­sity.

Ac­cord­ing to sta­tis­tics by the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers, a to­tal of 21,303 new energy cars were man­u­fac­tured and 18,054 were sold in Au­gust, thrice the amount in the same pe­riod last year. In May, the State Coun­cil had also un­veiled Made in China 2025, a pro­gram aimed at up­grad­ing the coun­try’s man­u­fac­tur­ing power over the next decade. It in­cludes spe­cial fund­ing and tax in­cen­tives in 10 in­dus­trial sec­tors, in­clud­ing new-energy ve­hi­cles.

“China’s in­creas­ing energy needs will in­crease the de­mand for ve­hi­cles pow­ered by al­ter­na­tive fu­els. Un­ac­cept­able air pol­lu­tion in ma­jor cities will also lead to tighter emis­sion stan­dards,” said Jack Perkowski, founder and man­ag­ing part­ner of JFP Hold­ings.

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