China auto association downgrades growth rate
China's vehicle sales plunged deeper in June, forcing the country's leading auto organization to slash the industry's estimated growth rate.
Statistics from the China Association of Automobile Manufacturers show that vehicles sold in June fell 5.3 percent from May to 1.8 million units, the smallest monthly sales in a four-month period. Sales in June were also a 2.3 percent dip from the same period in 2014.
Vehicles sold in the first half of the year totaled 11.85 million units, a meager growth of 1.4 percent from the same period a year earlier, which stands in stark contrast to 8.4 percent growth year-on-year in 2014.
The CAAM expects auto sales this year will grow 3 percent from 2014. It estimated at the start of this year the growth rate would reach around 7 percent.
Dong Yang, secretary-general of the association, said the sluggish performance in the auto market is the result of both downward economic pressure in China and people's enthusiasm for the stock market in previous months.
He said 2015 will not be a bumper year for automakers but added that he is optimistic about the industry in the long run.
"I don't think the Chinese market has become saturated. Car ownership per 1,000 people in China is still far lower than in developed countries like the US. And in many smaller cities and towns, motorcycles and electric tricycles are playing the role of cars," Dong said.
He suggested that, now while auto sales are not good, it might be a good time for the government to enhance their supervision and for carmakers to improve their products.
Many automakers started nationwide price-cutting campaigns in April to boost sales but the results have not been as good as expected.
Sales of passenger cars in June were 1.51 million units, a 6.1 percent fall year-on-year. The number of passenger cars manufactured in the month fell 5.3 percent from the same period a year earlier.
Chen Shihua, director of the information office at the CAAM, said it was the first time that both monthly sales and production had fallen since December 2008.
Things could have been even worse if SUV sales had not rocketed, Chen said. In June, nearly 450,000 SUVs were sold, a 37.8 percent rise year-on-year.
Cars, MPVs and crossovers saw their sales fall by 0.6 percent to 22.5 percent each from the same period last year.
Sales of commercial vehicles grew 3.5 percent year-on-year to 291,700 units in June. Those sold in the first half totaled 1.75 million, registering a 14.4 percent slump year-on-year.
However, new-energy vehicles are gaining momentum. The CAAM statistics show that China sold 21,055 such vehicles in June, more than double the figure of a year earlier.
Sales of new-energy vehicles in the first half hit 72,711 units, a 240 percent rise from the same period last year. Of those, 64 percent were pure electric models.
Domestic brands
Meanwhile, Chinese auto brands are gaining a larger share of the market.
By the end of June, domestic brands held a 41.5 percent market share, up from 37.9 percent in the same period a year earlier.
Dong said that is mainly because of the popularity of their SUVs, saying that their market share grew by 12.9 percentage points from January to July.
He urged automakers to be alert to this situation as enthusiasm with SUVs may gradually fade, and called on them to sharpen the competitive edge of family cars whose market share is dwindling.
In the same period, brands from Germany, Japan, the United States and South Korea saw their market shares fall by 0.1 percent to 1.7 percent each.
As auto sales slow, some industry insiders are advising caution against overcapacity.
They argue the combined auto capacity in China might reach 40 million units in 2015, while sales for the year are forecast to be 25 million units.
Yet Dong does not believe there is serious overcapacity. "The capacity at the end of 2014 was around 31 million units. That is a reasonable level," Dong said in an article on the CAAM website.
However, he warned against local government proposals to build plants for automakers in a move to attract their investment, which might trigger overcapacity and bring about other negative effects on the auto industry.
