China's auto makers experienced a "black May" and a lackluster June of falling sales and bulging inventories, leading to concerns that many may have to drop out of the market, state media reported yesterday.
Auto sales last month slipped 7.1 percent from the month before to 164,852 units for the third monthly decline, the China Business Weekly said, citing figures from the China Association of Automobile Manufacturers (CAAM).
Following an even steeper 20 percent plunge in May, this has caused dealers to worry that the auto market has reached a turning point at which the weakest competitors will be "washed out," the Xinhua news agency said.
"Behind the painful situation lies the chance of [consolidating] the national auto industry, which may take part in global competition afterwards," Xinhua said, citing unnamed experts.
Even the biggest car makers are struggling, as the CAAM said previously that the top five Chinese auto companies recorded a decrease in sales in May from the month earlier ranging between 7.4 and 25.1 percent.
The Chinese government has tried for the past decade to weed out the smallest and most inefficient auto makers, who make up the majority of the 123 companies in the industry.
Many of the lightweights were set up by local governments as prestige projects, but now turn out a tiny number of autos without any of the benefits of economies of scale.
Policy makers in Beijing hope they can groom a handful of large competitive players, and the recently stagnating market may help bring this about.
Year-on-year growth in auto sales has been in abrupt decline over the past few months.
In February, sales were up 76.8 percent from the same month a year earlier, but the growth had dropped sharply to just 2.2 percent in June, according to data from the CAAM.
The result of the decline in auto sales can be seen in the form of large numbers of newly-produced autos collecting dust because they have no buyers.
The auto manufacturing association reported that more than 140,000 sedans were piling up in the inventories as of the end of last month, the China Business Weekly said.
Predictions that the auto industry will have to consolidate have been fueled in recent months by new macroeconomic policies seen as being designed to force revolutionary change.
Concerned about overcapacity in the auto industry, policy makers in Beijing have been engaged in a lengthy effort to curb auto loans.
And last month, the top economic planning body published a long-awaited blueprint for the auto industry, raising the bar for companies wishing to engage in auto manufacturing.
The new regulations include a requirement that any new manufacturing company must have a minimum investment of 2 billion yuan (US$240 million).
One tangible result of declining sales could be a more aggressive price war for high-end autos to attract a dwindling pool of consumers, according to the state media.
"The price war in the low-end is almost finished, which leaves little space for further price cutting, but the medium-end market is different," auto analyst Xie Wei told the China Business Weekly.
"The `war' has just started, and the trend will continue for at least a year."
Real estate agent and property developer JSL Construction & Development Co (愛山林) led the average compensation rankings among companies listed on the Taiwan Stock Exchange (TWSE) last year, while contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) finished 14th. JSL Construction paid its employees total average compensation of NT$4.78 million (US$159,701), down 13.5 percent from a year earlier, but still ahead of the most profitable listed tech giants, including TSMC, TWSE data showed. Last year, the average compensation (which includes salary, overtime, bonuses and allowances) paid by TSMC rose 21.6 percent to reach about NT$3.33 million, lifting its ranking by 10 notches
SEASONAL WEAKNESS: The combined revenue of the top 10 foundries fell 5.4%, but rush orders and China’s subsidies partially offset slowing demand Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) further solidified its dominance in the global wafer foundry business in the first quarter of this year, remaining far ahead of its closest rival, Samsung Electronics Co, TrendForce Corp (集邦科技) said yesterday. TSMC posted US$25.52 billion in sales in the January-to-March period, down 5 percent from the previous quarter, but its market share rose from 67.1 percent the previous quarter to 67.6 percent, TrendForce said in a report. While smartphone-related wafer shipments declined in the first quarter due to seasonal factors, solid demand for artificial intelligence (AI) and high-performance computing (HPC) devices and urgent TV-related orders
Prices of gasoline and diesel products at domestic fuel stations are this week to rise NT$0.2 and NT$0.3 per liter respectively, after international crude oil prices increased last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices last week snapped a two-week losing streak as the geopolitical situation between Russia and Ukraine turned increasingly tense, CPC said in a statement. News that some oil production facilities in Alberta, Canada, were shut down due to wildfires and that US-Iran nuclear talks made no progress also helped push oil prices to a significant weekly gain, Formosa said
MINERAL DIPLOMACY: The Chinese commerce ministry said it approved applications for the export of rare earths in a move that could help ease US-China trade tensions Chinese Vice Premier He Lifeng (何立峰) is today to meet a US delegation for talks in the UK, Beijing announced on Saturday amid a fragile truce in the trade dispute between the two powers. He is to visit the UK from yesterday to Friday at the invitation of the British government, the Chinese Ministry of Foreign Affairs said in a statement. He and US representatives are to cochair the first meeting of the US-China economic and trade consultation mechanism, it said. US President Donald Trump on Friday announced that a new round of trade talks with China would start in London beginning today,
RSS