China car industry may be shifting into slow lane

[LRE]

China car industry may be shifting into slow lane

BEIJING: China’s car manufacturing sector has been used to racing ahead at sometimes dangerous-looking speeds but now it may have to get used to life in the slow lane, at least for a while.

At the Yongtai Auto dealership in Beijing, this September has been unusually lacklustre, with sales down about 10 percent from a year ago. “People are waiting for the price to drop,” said Xiong Tao, a sales manager at the dealership. “People are more cautious with their money.”

The global turmoil, combined with plunging stock prices at home, are key reasons why a market spoiled by double-digit growth figures has changed so abruptly.

After growth of 22 percent in 2007 and 25 percent in 2006, the car manufacturing sector this year is likely to expand by only seven to nine percent, according to various estimates based on figures for the first nine months.

Even so, China remains a land of golden opportunity, at least if contrasted with the sombreness in Europe and the United States, where makers of cars and equipment are seriously concerned about the impact of the crisis. Many have already cut back production.

In the first nine months of the year, Ford Motor China reported little more than seven percent in vehicle sales, while passenger car sales were up by a mere six percent.

Volkswagen China did slightly better, reporting a sales increase of 13.1 percent in the same period, according to data that also included Hong Kong and Macao business.

“The downturn in the global economy and natural disasters affected the China’s auto market to a large extent,” Winfried Vahland, president and CEO of Volkswagen Group China, said in a statement.

“The increase in the prices of raw materials and petroleum have caused huge pressure on all auto makers. The global financial market is very unstable. All these are challenging auto makers in China as well as in the world.”

The drop appears to have set in only in the third quarter, since Volkswagen reported growth of 23.3 percent in the first six months.

As late as April, the German company even opened a new plant, in the east Chinese city of Nanjing, “to respond to growing demand”.

Honda Motor has seen sales rise by 19.7 percent this year but, significantly, for the month of September alone, sales were up by just 3.5 percent. “A number of factors, both internal and external to China, have contributed to the slowdown in the third quarter,” said Robert Graziano, president of Ford Motor China, in a statement.

Among major internal factors were the August Olympics and the traffic restrictions it caused in Beijing, which accounts for eight percent of the Chinese market.

“The residents of Beijing didn’t know if these restrictions were going to become permanent and so they put off planned purchases of autos,” said Alexis Vannier, a spokesman for PSA Peugeot Citroen. afp


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