China Auto Sales Set For Massive Decline
Despite vehicle sales this year expected to be in excess of 15 million units
, the underlying trend is for a huge slowdown in purchases, according to the China Association of Automobile Manufacturers.The Associations secretary-general, Dong Yang, said that car sales in China will have grown by 10 percent in volume this year, down from the 48 percent recorded in the first six months of the year and the 45 percent recorded for 2009. That indicates a contraction of 20 percent across the entire market for the second half of 2010.
Auto sales in China have grown mainly thanks to the governments massive fiscal stimulus plan that provided cheap money and credit to the nations consumers. However, the impact of this has been to bring forward future sales, rather than create additional demand. Stockpiles in vehicle dealerships have also been growing, and are running at a rate of 58 days worth of inventory, up from an average of 43 days in January, while China is also seeing the advent of used car salesrooms, something not seen before.
The decline of Chinas auto sales will have a serious impact on auto component suppliers, who will also need to scale back production and possibly workforce. In effect, China manufactured its own mini boom with the fiscal stimulus at a time when mature markets where in decline due to the global downturn. It remains to be seen how long it will take before Chinas auto manufacturing volume slips back to more sustainable levels and markets such as the United States recover and reclaim their dominant positions.
by: Dezan Shira & Associates