Top global auto manufacturers are having a tough time with falling sales in the largest auto market of the world – China, which has in recent years become a pillar of growth and revenues of top international auto brands.
The fast economic growth in China has financially empowered millions of Chinese to purchase cars which has, for a number of years now, made the Chinese market a very critical source of revenue and growth for global car makers. In fact China generates more revenues form sale of cars and autos than the market of the United States for some companies like General Motors and Volkswagen.
But the current situation has hut such companies. It has been quite tough to generate sale in the Chinese market this year because of a slowdown in growth in the wider economy and because of the looming threat of a full-blown trade war with the US.
There has been an almost 11 per cent drop in the sale of Volkswagen in September, said the company on Tuesday. A 15 per cent drop in sale in the Chinese market in the third quarter was reported a day earlier by GM. One of the British factories would be shut down by Jaguar Land Rover for two weeks because of a 46 per cent drop in its China sale in September. And Ford has said that its sale in the market has been going down for months now.
“After years of astronomical growth, China’s auto market is finally coming back to earth,” said Beijing-based advisory firm Trivium in a note Tuesday. According to the China Association of Automobile Manufacturers, both July and August noted a drop in auto sale in the market.
According to a statement by VW, the company has been reluctant to bring out new cars because of a “marked general uncertainty among consumers” due to the trade war with the United States.
And according to Yale Zhang, managing director at Shanghai-based consultancy Automotive Foresight, the problem has been compounded by a sudden drop in the fortunes of the Chinese stock market. The fall has eroded large portions of household income which has prevented households from making expensive purchases.
And according to Trivium, some consumers are delaying their purchase because new emissions standards are to be implemented in the country from starting next year.
The bulk of the slowdown has apparently hit foreign brands the most. There was a drop of 20 per cent year-on-year in the month of August in the Chinese market in sales of US models. And according to data from the manufacturers’ association, compared to the slowdown in the sale of Chinese companies that drop is almost double.
Some of the Western auto companies such as Jaguar Land Rover and GM are known for their SUVs which are huge users of oil. This makes them less appealing for Chinese consumers.
“Gas prices will definitely have an effect on sales,” said Tu Le, head of Shanghai-based consultancy Sino Auto Insights.
Rising fuel prices – in line with global crude price rise, has increased suffering for oil using vehicles.
On the other hand, a possible reason for the slowdown in sale for vehicles of companies like Ford and BMW could be their lacklustre efforts at introducing their latest models which has made consumers included to wait some more for the latest product to come into the market.
(Adapted from CNN.com)