The auto market in China has faded

Article by Anita Panait, on September 7, 2012

The auto market in China has faded. It’s quite a bit of a surprise since just last April, there was so much optimism at the Beijing auto show. Several global carmakers as well as American auto dealers have entered and made investments in China, the world’s largest vehicle market this year, which was dubbed as the “Gold Rush of 2012” by Jim Press, chief of the firm’s international operations.

One of these dealers is the McLarty Automotive Partner. Mark McLarty, head of the company’s China network, and Press had even planned to double its dealerships to 23 this year. But the unexpected occurred and China’s gold rush subsided. Plants in the Asian country are running below capacity while vehicle prices are diving.

The sluggish sales in China might have forced McLarty Automotive to sign an agreement last week to sell all of its 12 luxury dealerships to domestic retailing giant Baoxin Auto Group Ltd., for shares in Baoxin. Other investors in McLarty's China operations are opting to take cash or stock.

According to Thomas “Mack” McLarty, chief executive of McLarty Companies, China in the near term is not the robust market that the country has seen the past 10 years. McLarty, however, extolled the long-term prospects in the Asian nation. Among the factors seen to have caused the sluggish vehicle sales in China include a shift in government policy towards of public transportation to ease China's reliance on foreign oil. Also, several major Chinese cities have imposed limits on new-vehicle registrations.

According to Kenneth DeWoskin, chairman of Deloitte China, there is an ongoing dramatic shift in China. He remarked that many multinational companies failed to take note of the demand curve as they were too focused on regulatory approval from the Chinese government. Some carmakers, like Ford, are placing their bets on the long-term economic growth in China. [source: Automotive News - sub. required]

Topics: china, sales

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