China auto industry had its worst May ever

Article by Christian Andrei, on June 9, 2015

With only a 3.8% increase in passenger-vehicle deliveries with 1.57 million units in China, it had its “worst May ever” when it comes to sales growth, according to Passenger Car Association secretary-general Cui Dongshu. Even with bigger discounts, automakers were unable to jumpstart the sluggish growth in auto sales in China last month as buyers chose to defer purchases and place investments in the massive stock-market rally instead.

Cui said that the stock market is acting like a “pump” that has sucked up people’s money. He said that it doesn’t matter how attractive the incentives are because people want to pour their money into the stock market and are not purchasing cars.

The auto industry has struggled amid the doubling of the Shanghai Composite (China’s stock market), the slowdown in its economy, and the purchase restrictions imposed by a rising number of cities to limit congestion and smog.

This year, vehicle sales in China could gain by lower than the 7% estimated in January as the economy becomes slower, according to the projection last April by the China Association of Automobile Manufacturers. No new forecast was given.

There may have been a gain in auto sales across the industry but when you look closely, local automakers have widened their market share by offering more affordable SUVs.

Meanwhile, foreign automakers have had to give steep discounts to attempt to spur sales. Last month, a 26% increase was reported by Great Wall Motor Co., China's largest SUV maker. Meanwhile, Geely Automobile Holdings’ deliveries increased by 25%.

Last month, a 32% increase in sales was reported by Honda Motor Co. Toyota Motor’s deliveries went up by 13%. In comparison, General Motors’ sales declined by 4% despite reducing prices on 40 models across its Buick, Chevrolet and Cadillac brands.

Sales growth at Ford Motor and its 2 joint ventures fell in March and April but there was a 4% increase in May to 91,013 vehicles. However, Ford was unable to keep its momentum with a 15% sales increase in the first two months of the year.

Barclays analyst Song Yang said that the auto market is “abnormal” and “just doesn’t feel right.”

Topics: china

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