The performance of vehicle manufacturing companies throughout the world is being affected by the slowdown in the Chinese market of auto sales in the month of September.
Data from multiple sources show that there was a 11.6 per cent drop in the month of September in auto sale in China which is the third straight month of slowdown of year-on-year sale.
This slowdown coincides with a general slowdown of the Chinese economy.
Foreign car companies appear to have been affected the most with Ford reporting a 43 per cent drop in its September sale in China.
Similar significant drops in sale were earlier reported by Volkswagen, Jaguar Land Rover and General Motors.
However, for the full year of 20918, growth in auto sale is still being expected by the China Association of Automobile Manufacturers.
But that optimism is not shared by some analysts who are predicting that since the 1990s. 2018 can be the first year when the auto market in China will see a contraction.
China is the largest auto market in the world and has surpassed the United States.
“This is new territory,” said Michael Dunne, chief executive of ZoZo Go, an investment advisory firm focused on China’s car market.
The International Monetary Fund has recently downgraded the growth in Chinese economy to slow down to about 6.6 per cent for the current year compared to the 2017 growth rate of 6.9 per cent. The Fund also reduced its forecast for growth for the market for 2019 to 6.2 per cent. The factors that were cited by the Fund for this slowdown include the escalating trade tensions between the US and China with both the countries imposing import tariffs on each other’s goods worth billions of dollar.
There has recently been a crackdown by the Chinese government on peer-to-peer lending which was one of the major sources of funding for many cat purchasers, said Dunne.
There is also a rising concern among Chinese consumers about the possible impact of the trade tensions with the US.
“It doesn’t affect them individually yet, but it’s a cloud hanging over their lives,” he said.
But this slump of demand in China is turning out to be a problem for global carmakers, for whom the Chinese market has been for long a very dependable market for growth.
Following a 46 per cent slump in sale in China, a two week shut down of its plant in Solihull was announced by Jaguar Land Rover this week.
On the other hand, there was a drop of 11 per cent and 15 per cent year-on-tear in the September sale for Volkswagen and General Motors respectively and the revenues from that market accounts for about 40% of their total global sales volumes.
Chinese auto makers have also been affected by this trend.
For example, about 122,000 cars in China in August were sold Geely Automobile Holdings which is amongst the biggest car companies in China which has seen strong demand this year. The growth was just 1 per cent while in the same month a year ago, it was 14 per cent. “Growth and profits are at stake and they’ve come to expect them from China,” Dunne says.
(Adapted from BBC.com)