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China’s dealers pessimistic about 2013

SUZHOU – The vast majority of Chinese dealers believe that growth of China’s automobile sales would be in the single digit range in 2013, according to a poll conducted by the China Automobile Dealers Association (CADA) at its annual conference held here on November 28-30.

About 83 percent of the more than 1,000 dealer representatives attending the annual event agreed, through a voting machine during the plenary session on November 29, that growth of the market in 2013 would be between 0-10 percent.

Of these, 44 percent or close to half believed that the growth rate would be between 0-5 percent. About 11 percent believed that the market in 2013 would see negative growth. Only 6 percent agreed that the growth in 2013 would be over 10 percent.

CADA’s annual event, which is the 8th since its first convention held in 2005, was held in the Suzhou International Expo Center located in the famous and beautiful Suzhou International Industrial City jointly developed by Suzhou and Singapore.

The dealer response was in keeping with most auto analysts who spoke at the conference. Ren Xingzhou, director of Market Economy Research Institute with the State Council Development and Research Center, pointed out the decline of the country’s overall economic demand in the first 10 months of the year, with fixed assets investment down to 18.8 percent, consumption down to 11.6 percent and export experiencing heavy fluctuations.

“It would be very difficult to realize double-digit growth and for an extended period of time, GDP growth would remain at around 7 percent,” she said.

A panel of automotive analysts discussed market demand in 2013. Analyst Jia Xinguang believes that although the overall economic picture should be better in 2013 because of efforts by China’s new leaders, market demand would be constrained by growing problems of automobile usage such as traffic congestion and restriction of vehicle registration. “The market in 2013 will be not much better than 2012,” Jia said. “Demand for passenger vehicles will see growth of 8-10 percent. It will be difficult to past 10 percent.”

Rao Da, secretary general of China Passenger Car Association, said total automobile sales in 2013 would be “20 million or less, up around 5 percent. “The central government won’t tolerate if sales are higher than 5 percent mainly because of urban congestion. Even at that level of growth the automotive sector will still be profitable,” Rao said. Rao believes that total sales of automobiles in 2012 may be 19 million units or less.

Su Hui, director of CADA’s automobile marts said that although historically sales were normally strong in odd years and weak in even years, demand in 2013 may not be strong. Despite a consensus among industry analysts that 2013 may see a 5-10 percent growth, dealers are voicing concerns of a much weaker market. “It is the first time in many years that OEMs are finding it hard to enlist dealers in 2012,” Su said. In Beijing, 50 percent of the dealers are operating at a loss and in Guangzhou as much as 75 percent of the dealers are reportedly at a loss. The challenges are much greater than opportunities in 2013.”

Zhang Biao, chairman of Zhenjiang Yuantong Auto Group, one of China’s largest dealer groups, expects a slow growth in 2013. “We should be prepared for less growth, maybe 5 percent, in our planning,” Zhang said. “But it is more important for us to be concerned about balanced output and demand instead of growth rate.”

Pang Qinghua, chairman of the public listed Pangda dealer group, believes, however, that 2013 would be better because of rising consumer purchase power, easing of inventory pressure and a prospective growth in the commercial vehicle sector as national economic growth warms up.

More bullish than most analysts, State Information Center’s Xu Changming believes that sales of passenger vehicles in 2013 would witness a minimum of 10 percent growth. Drawing on the history of developed markets, Xu believes that China is moving into a period of “moderate” but not “micro” growth, with an average annual increase in sales of 8 percent until 2025.

Participating dealer representatives also expressed their opinion in three other on-the-spot polls: the most urgent regulatory issue to be undertaken by the government, the necessity of preferential policies in sales to rural residents and the necessity of preferential policies for scraping passenger vehicles.

About 62 percent of dealers believe that the most pressing regulatory issue to be undertaken by the government is to change the short term of brand authorization, relieve overly crowded dealer network and high inventory pressure. About 33 percent of the respondents believe that the most urgent regulatory issue to be undertaken by the government is to break OEM’s monopoly in aftermarket service parts.

With regard to preferential rural policies in automobile sales, 64 percent believe that the government should have such a policy in place on the long term. But 24 percent believe that it is not necessary for the government to offer any subsidies for rural residents. The remaining 12 percent expressed their hope that the government should come out with a short-term preferential policy as soon as possible.

An overwhelming 91 percent of the dealers agree that the government should implement, as soon as possible, a cash-for-clunkers policy.

The 2012 annual convention also organized an international panel participated by representatives of dealers, dealer associations and service providers from the U.S., U.K, Australia and Italy.

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