Slow auto sales expected to continue as 'new normal'

Overcapacity of concern in sluggish car industry

China's auto sales hit a new low over a three-month period in May and experts do not expect rapid recovery in the near future.

Auto sales fell 4.6 percent month-on-month to 1.9 million units in May, a 0.4 percent dip year-on-year, according to the China Association of Automobile Manufacturers.

Price cuts on Chevrolets lure potential buyers after lackluster performance in May. Wang Biao / CFP

The lackluster performance has further slowed the growth pace of the world's largest auto market.

CAAM statistics show the country's auto sales in the first five months totaled 10.05 million units, a meager growth rate of 2.11 percent from the same period a year earlier, which stands as a stark contrast to a 9 percent year-on-year growth rate in 2014.

Yao Jie, deputy secretary-general of the association, said the trend is "consistent with" the "new normal" of economic growth in China, indicating that the country's auto sales have entered a period of slow growth.

Many automakers started nationwide campaigns in April to cut prices to boost their sales.

Despite such efforts, the situation will not change for the better in the short term, said Simon Feng, executive director of Menutor Consulting.

He said the move has not been of much benefit to customers as automakers' price cuts were similar to what auto dealers had already offered.

"Slow growth will continue for some time to come if there are not changes in the macroeconomic environment or relevant policies," he said.

However, Feng said, there is no need for too much concern as the slowdown is a normal phenomenon.

"It is impossible to sustain high-speed growth forever. It is like a boy growing up. He definitely grows faster as a boy than as an adult," Feng said.

Passenger cars

Despite the slowed growth, sales of passenger cars in China remain the envy of many countries.

In the first five months, China sold 8.58 million passenger cars, a decent rise of 6.4 percent from the same period a year earlier.

Chen Shihua, director of the information office at the CAAM, said the increase was mainly due to surges in sales of SUVs and MPVs.

Statistics show that SUV sales in the period rocketed by 47.7 percent and MPV sales by 17.9 percent year-on-year.

The boom in SUV and MPV sales is helping Chinese brands gain a larger share of the auto market.

By the end of May, domestic brands held a 42.1 percent market share, up from 38.2 percent in the same period a year earlier.

During that time, brands from Germany, Japan, the United States and South Korea saw their market share fall by 0.5 percent to 1.7 percent each.

As auto sales slow, many industry insiders are advising caution against overcapacity.

The combined auto capacity in China is estimated to be 40 million units in 2015, while sales for the year are forecast to be 25 million units.

A recent survey shows that half the production lines remain idle at 15 out of 19 Chinese automakers.

Overcapacity has become a problem, said Liu Weidong, vice-general manager of China's Dongfeng Motor Corp, at the Global Automotive Forum held in Chongqing on June 9 and 10.

He estimated that overall market growth would be lower than 3 percent or even stagnant, adding that Dongfeng has been controlling the number of its new projects since 2013.

Feng also warned of overcapacity and said it would become a problem when the industry's overall growth falls below the growth rate of China's GDP, which stood at 7 percent in the first quarter.

Some joint ventures have cut their production. Local Chinese reports said FAW-VW produced 25 percent fewer vehicles in April than the same period a year earlier; Dongfeng Honda reduced production by 20.9 percent and Beijing Hyundai by 8.8 percent.

lifusheng@chinadaily.com.cn

(China Daily 06/15/2015 page18)