China’s vehicle sales remain in doldrums

The Financial Times, January 11, 2013

by Patti Waldmeir

Vehicle sales in China, the world’s largest auto market, rose 4.3 per cent in 2012 to 19.3m, a modest increase over the previous year’s pace, according to the China Association of Automobile Manufacturers.

But while last year’s sales growth surpassed that of 2011, when sales rose only 2.5 per cent, it was still far below the stratospheric levels of 2009 and 2010 when vehicle sales rose 46 and 32 per cent respectively.

Sales were affected over the year by a broad slowdown in China’s economy coupled with traffic restrictions imposed by several cities and lower sales of Japanese cars due to Sino-Japanese political tensions.

CAAM is predicting a slightly rosier picture for 2013, forecasting a 7 per cent rise in total vehicle sales for the year. It expects passenger car sales to increase 8.5 per cent with commercial vehicle sales expanding only 1 per cent.

Official figures for wholesale deliveries to dealers, announced on Friday by CAAM, showed that sales began to recover near the end of the year. December vehicle sales rose 7.1 per cent from a year earlier, slowing from November’s 8.2 per cent pace but extending a turnround from a fall of 1.7 per cent in September.

That came as sales of Japanese carmakers in China also began to recover, after tumbling in September and October following widespread street demonstrations triggered by Tokyo’s de facto nationalisation of disputed islands in the South China Sea. Japanese carmakers in China told Chinese media this week that they had ramped up production toward the end of the year.

Passenger cars sold particularly well, said Lin Huaibin of IHS Automotive in Shanghai. “Passenger vehicle sales remain buoyant with about 9 per cent growth in 2012, with weakness particularly coming from light and heavy commercial vehicles.”

China is expected to produce more cars than Europe in 2013 for the first time, a milestone in the country’s industrial history.

Bill Russo, head of Synergistics auto consultancy in Beijing, said he expected annual car sales growth of “between 5 and 8 per cent over the next decade as a function of the central government’s desire for stable and more sustainable economic growth, the phasing out of auto subsidies, and to a lesser extent the licence plate restrictions in cities like Shanghai and Beijing”.

But traffic congestion and licence plate restrictions imposed by increasingly gridlocked municipalities will keep downward pressure on sales, said Jia Xinguang, researcher with the Chinese Automotive Industry Development Research Institute. “The government will continue to impose restrictions on car purchasing and traffic controls in more cities as long as traffic congestion is still severe,” said Mr Jia.

Despite slower growth, China remains the top investment destination for global automakers, attracted by significant domestic demand and export opportunities, according to KPMG’s annual Global Automotive Executive Survey published this week.

Of those polled, 70 per cent of respondents said China was their top choice for investment, ahead of India at 63 per cent, Russia at 54 per cent and Brazil at 48 per cent.

Additional reporting by Yan Zhang in Shanghai

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