China slashed its forecast for vehicle sales in the world’s largest market, projecting deliveries to expand at the slowest pace in four years amid a stock market rout that threatens to dent consumer sentiment.
Total vehicle deliveries including trucks and buses are set to rise by 3 percent this year, down from the 7 percent projected in January, the China Association of Automobile Manufacturers (CAAM) said yesterday. That would be the smallest increase since 2011, when the government unwound stimulus measures unleashed in the wake of the global financial crisis.
Global automakers such as Volkswagen AG and General Motors Co are now growing slower in China — where they have spent billions of US dollars to build factories — than in their home markets. With the recent stock market rout wiping out US$3.9 trillion of value and economic growth continuing to moderate, concerns are rising that demand is set to slow further even as more auto factories are completed.
“I don’t think you can imagine very strong growth in the market,” BMI Research London-based head of auto analysis Anna-Marie Baisden said. “The second half will be worse, people would’ve lost money from the markets, and the whole economic situation hasn’t been helping.”
The revised forecast comes as Volkswagen, the biggest foreign automaker by sales in China, became the latest company to extend financial assistance to its dealers.
The 1 billion yuan (US$161 million) in funding is to be paid to distributors selling Volkswagen cars made by the company’s joint venture with China FAW Group Corp (第一汽車), according to two people familiar with the plan, who asked not to be named, because the discussions were private.
“Dealers are facing some hardships,” FAW-Volkswagen (群眾汽車集團) spokesman Li Peng-cheng (李鵬程) said in a telephone interview on Thursday, without confirming the amount of the funding. “Based on the current situation, we will surely help them out.”
Earlier this week, Passenger Car Association secretary-general Cui Dongshu (崔東樹) described the stock-market rout that turned a world-beating boom into a bust as a “meat grinder” that destroyed wealth that might otherwise have been spent on new cars.
“China’s auto market would be much more stable if there is no stock market, given that it damps demand no matter whether stock prices go up or goes down,” CAAM secretary-general Dong Yang (董揚) said. “If people have extra money, don’t invest in the stock market. It would be nicer if people use it to buy cars.”
Price cuts by both foreign and domestic brands over the past months have done little to spur demand in China. A survey by MNI Indicators showed that the proportion of consumers who planned to buy a car shrank last month, while inventory was at levels that indicate low market demand for nine consecutive months.
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