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Rao Da: China’s auto market in the first half of 2011, worst performance in 20 years

–  by Du Wei

“China’s auto market in the first half of 2011 has done worse than anytime in the past 20 years,” said Rao Da, secretary-general of China Passenger Car Association (CPCA) during an interview with auto.sohu.com in late June. Rao analyzed the sagging China auto market in January-June period and provided his own forecast on the second half of this year. The following are the highlights of the interview. – Editor

The structural imbalance of China’s auto market

Rao: Judging from the current situation, the market performance in June should be slightly better than that of May: a similar sales volume compared with that of May and a slimly higher growth rate year-on-year. China sold around 800,000 passenger vehicles in June 2010 and we expect an over 850,000 units in sales this June. The overall growth will be dragged down a bit due to the slumping sales of microvans.

auto.sohu: The PV segment has taken up too many shares of the whole market, which is not a healthy structure for an auto market. How should we perceive this?

Rao: Both car and MPV shares in the China auto market are high, which is not good in terms of energy saving and emission reduction. China’s microvans also take up a larger share in the market compared with many foreign countries except Japan. Now we are seeing growth of microvans in export and their sizes are becoming larger than before.

auto.sohu: What are the causes of the negative growth of microvans in April and May?

Rao: The sales slump is due to the phasing out of government subsidy programs, including the “vehicles going to the countryside,” tax cut for purchase of small-displacement vehicles, and the vehicle trade-ins. Car buyers could enjoy a discount of 12 percent under the first two subsidy programs, which was particularly economical for rural consumers.

auto.sohu: Many automakers launched SUV models last year. Now the market is experiencing a downturn. What is your opinion on this?

Rao: China suspended the formulation of five-year plan for its auto industry, thus the whole market was a little discouraged. However, vehicle import is not affected. For example, import of large-displacement SUVs registered an over 20 percent increase.

Beijing’s auto purchase restriction not shaking the whole country

auto.sohu: Has the auto purchase restriction in Beijing affected the whole auto market in the country? It is said that dealers of other provinces are welcoming Beijing’s new policy.

Rao: Part of the reason is that the car prices in Beijing have long been among the least expensive price list, and consumers from other provinces used to purchase vehicles in Beijing for a better deal. Beijing’s auto purchase restriction, however, has contributed to the backflow of customers to local dealers. The restriction exhilarated dealers outside Beijing unintentionally, but slashed almost half sales of the city since the implementation of such policy.

With Beijing occupying only around 6.8 percent of the country’s auto market, the restriction has not yet affected the country’s sales performance. However, the policy delivered a heavy below to large metropolises. Beijing, Shanghai and Tianjin, for example, had a sale down by 29 percent in April.

auto.sohu: Potential buyers are complaining about the lot-drawing system, and a privileged few are reported to be buying quotas for car purchase. Moreover, rumors say that the National Development and Reform Commission (NDRC) has appealed to the State Council for cancelation of the purchase restriction. Is it possible that the Beijing municipal government will end the restriction policy?

Rao: If it happens, there must be a new policy to replace the current one. The traffic problem in Beijing, if worsened, could turn into a political issue.

Possible negative growth in H2 2011

auto.sohu: What is your prediction for sales in the second half of the year?

Rao: Vehicle sales in September and November this year may grow as they are traditional high seasons for sales, while the other four months in the second half are bound to experience negative growth. Market performance in the first six months of this year was even worse than that of 2008, the economic crisis year, in both PV and CV segments, or the worst performance in 20 years.

China’s auto market increased 6.7 percent in the first half of 2008 with 7 percent growth in PV segment including microvans. It is possible that the highest growth achieved this year will be lower than that achieved in the first half of 2008. Automakers should not count on incentive policies, because our society just can no longer afford such high-speed auto growth.

Rewritten by Jennifer Chen based on author’s article at auto.sohu.com

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