Consumer confidence, sales fall in China

  • 23-Oct-2008 04:23 EDT
FAW Bestern B50.jpg

FAW was an exception to the rule in August, with a year-on-year monthly sales increase of 86% to 4032 units. Shown is its Besturn B50 at Auto China 2008. (Patrick Ponticel)

Passenger-vehicle sales in China dropped in the month of August—the first monthly decline in three and a half years, according to Automotive Resources Asia (ARA). T­he market-research firm in a recent report noted that "close economic ties built with the U.S. threaten to negatively impact the China economy going forward," contributing to a flat or negative sales rate for the remainder of the year.

Real-estate and stock-market values are in decline, "hurting consumer confidence and buyers’ willingness to purchase big-ticket items," ARA said in its report. China’s competitiveness in export markets is declining because of a strengthening yuan, ARA added, and factories in southern China are closing, "damaging the economic prosperity of the region."

On the other hand, ARA notes, the government reversed a two-year trend of tightening monetary policy recently, lowering the interest rate and loosening the lending requirements. Plus, dealers expect manufacturers to offer incentives. How that all pans out in terms of sales is unclear, ARA acknowledges.

It said sales of passenger vehicles in August fell by 6% to 392,354 units. A strong first part of 2008 gives China a year-to-date increase of 12% to 3.75 million units. Light commercial vehicle sales also were down, although by only 1%. The company projects 2008 combined sales of both vehicle types to reach 8.9 million units.

The luxury segment saw an increase in August, at least in part because of an impending increase in the excise tax on vehicles with engines of 3.0-L or greater displacement, according to ARA. Sales were up 17% in August. The SUV segment enjoyed even better growth at 18%. All others suffered declines, with the mini car segment dropping 16% and the subcompact segment dropping 13%.

Western brands suffered the most, according to ARA, while Japanese and Korean brands performed best. In the extremes, PSA Group’s numbers fell 38% while Honda’s grew by 20%. It was a mixed bag for Chinese automakers, with the largest, Chery, suffering a 24% decline in August while BYD Auto saw a 137% increase.

With fuel prices rising in China, ARA expects the subcompact segment to draw share from segments above and below because of "competitive pricing, better fuel efficiency, and overall improvements in vehicle quality and performance."

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