SHAFAQNA – China’s auto industry could face a second straight year of weaker growth after a sharp 2014 slowdown, according to an industry association and analysts, as car makers continue to grapple with a cooling economy and rising inventories.
The China Association of Automobile Manufacturers said Monday that it expects passenger vehicle sales to rise 8% to 21.25 million vehicles this year, compared with 9.9% growth in 2014. While that pace would be strong compared with weaker markets such as Western Europe and the U.S., it still marks a sharp slowdown from a 16% gain in 2013 and even higher rates in some previous years.
By comparison, U.S. sales last year rose 5.9% from the year earlier to 16.5 million cars and light trucks, helped by low fuel prices and low interest rates.
Analysts predict that China’s slowing growth will weigh on auto sales over the course of the year. China’s gross domestic product is widely expected to rise 7.3% in 2014, the weakest since 1990, and further deceleration is likely, said economists.
“Sales growth of sedans has almost stalled in recent months because buyers are more vulnerable to economic swings,” said Yale Zhang, managing director of consulting firm Automotive Foresight. In 2014, China’s sedan sales grew only 3% from a year earlier to 12.4 million cars.
Dealers including Xie Zongwei agreed. “People are asking for greater discounts. I feel it’s getting more difficult to sell cars,” said Mr. Xie, who sells Chevrolet, Hyundai and Chinese domestic brand Geely in the northern city of Handan in Hebei province.
The China auto association sees a somewhat brighter outlook for commercial vehicles, which are dependent on the property market. Overall, it expects total sales of passenger and commercial vehicles this year to rise 7% from 2014 to 25.13 million, compared with 6.9% last year.
The industry group’s estimates are largely in line with analysts. Business Monitor International, a unit of Fitch Group, expected growth in China’s passenger car sales to slow to 7% this year. LMC Automotive forecast a 9% rise for the passenger car market and IHS Automotive forecast an 8% rise.
In addition to the economic deceleration, demand for cars is taking a hit from the increasing number of cities placing restrictions on car sales to tackle their worsening air pollution and traffic problems.
In December, the affluent southern city of Shenzhen joined other major urban centers in curbing car purchases. The city now caps the number of new cars to 100,000 vehicles a year, less than half of an estimated 250,000 new vehicles sold in 2014.
Cities that may follow suit this year include Chengdu, Suzhou, Nanjing and Xian, said Ways Consulting Co., a Guangzhou-based consulting firm focused on the Chinese automotive industry. Each of the cities has had more than 100 autos per kilometer on the road, said the consultancy, adding that the four cities sold more than 1.2 million new cars in the first 10 months of 2014.
The association’s figures track vehicles shipped to dealers rather than sold to consumers, and rising inventories in dealer lots suggest an increasing number of cars is going unsold. Latest data from the China Automobile Dealers Association show that stockpiles at China’s more than 22,000 dealerships jumped to 55 days of sales in November, up from 44 days in October and the highest level since June 2012.
“In a sense, this can be construed as taking demand from the future,” said Anna-Marie Baisden, an analyst at Business Monitor International.
—Rose Yu and Lilian Lin
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