China’s Cooling Economy Leads to Slower Auto Sales

On Friday, the China Association of Automobile Manufacturers reported that wholesale deliveries of passenger cars, including minivans and SUVs rose by 0.3 percent to 1.34 million in November.  The median estimate of five auto industry analysts surveyed by Bloomberg placed the numbers slightly higher, at 0.5 percent for the month.

That’s the slowest pace of growth in the last six months, and it is being attributed to tightening Chinese economy and suspension of government incentives. Last May, sales fell 0.1 percent to about 1.04 million units.

Higher interest rates, inflation and the suspension of the Chinese government’s two-year incentive program have led to a decline in auto purchases that may result in the smallest increase in sales in the past 13 years.

Autoforesight Shanghai Company managing director Yale Zhang said, “Inflation and gasoline prices are high and the outlook is still uncertain. This has reduced consumers’ will to purchase.”

After increasing by a whopping 32 percent in 2010, the China Association of Automobile Manufacturers now forecasts the number of vehicles that will be delivered to Chinese dealerships will increase by only a meager 3 percent to 5 percent this year.  At that rate, the Chinese market would trail the U.S. in passenger vehicle retail sales for the first time since 1998.

The decline in November sales came largely from the 9.5 percent decrease in minivan sales which overshadowed the 21 percent increase in SUV sales.

According to the association, total vehicle sales, including trucks and buses, fell by 2.4 percent in November, to 1.66 million units. From January through November, total vehicle sales fell 2.6 percent, while passenger car deliveries increased by 5.3 percent to 13.1 million units.

Ford Motor Company saw its China sales fall 7 percent in November to 43,338, while General Motors Company saw a 20 percent increase to 237,130 passenger vehicles, the largest gain in ten months.

According to the association, the Buick Excelle and Volkswagen Lavida tied for the title of best-selling passenger car in China in November with sales of 23,900 units.

The decline in auto sales in China is seen as further evidence that the world’s second-largest economy is losing steam.

Chief Executive Officer of BMW Brilliance Automotive Ltd and President of BMW Brilliance Automotive Ltd, Olaf Kastner said, “We’re aware of how the world economy is performing. For next year we’re still positive.” He added, “We might not see the very high growth rate we have enjoyed for the last two to three years, all of us.”

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