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Worst performance in 20 years

China’s automobile sales in the first six months may at best register a 5 percent growth year-on-year, according to incomplete statistics available from China Passenger Vehicle Association (CPVA).

This would be China’s “worse performance in 20 years,” CPVA’s secretary-general and veteran automobile analyst Rao Da told local media.

“The overall market in 2011 is expected to be worse than 2008, when sales growth dropped to little more than 6 percent,” Rao said.

Sales of automobiles in the first five months were 7.92 million units, up only 4 percent year-on-year. Although June sales of passenger vehicles are expected to be around 900,000 units and slightly better than May, total sales of automobiles in the first half of 2011 are expected to see a modest 5 percent growth.

Analysts believe that market prospects in the second half of 2011 may be worse. For one thing sales numbers in the first six months, especially in the first quarter, included unreported numbers by leading carmakers at the end of last year. It has also been a practice by carmakers to inflate sales numbers they report to China Association of Automobile Manufacturers (CAAM), such as in the case of Hawtai.

For another, no more government incentives in support of automobile production and sales are expected to be taken in the second half of the year. In fact, decision makers are getting a wakeup call from the rampant expansion of the automobile market in the past two years that have grinding metropolitan traffic into a standstill, prompting China’s capital city to  restrict the number of vehicle license plates.

Out of concerns of traffic gridlocks, energy safety and environmental protection, central and local governments are expected to issue restrictive policy measures in an effort to limit the use of automobiles in  large and medium cities. For the first time in 25 years, the central government has given up drafting a five-year plan for the development of the automobile industry in 2011-2015.

Output and sales in the summer months are traditionally at a low point in the year. It would be not surprising to see sales of passenger vehicles decline in July and August compared to both those of June and year-on-year. As the unusual sales growth in the last quarter of 2010 was driven largely by policy factors, it is a foregone conclusion that the market will see a negative growth in most of the remaining months in 2011.

It seems the worst performance in China’s automobile market is yet to come.

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