German vehicle maker Volkswagen reported on Thursday a slowing of its sales growth in the intensely competitive Chinese market in the third quarter and said its dominant market share had been cut to less than a third, Reuters reported.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Volkswagen reportedly said it had sold 490,279 vehicles in China in the first three quarters of 2003, up 33% from a year earlier, but this growth rate was slower than the 52% growth seen in the first six months and slower than the market’s growth rate, Reuters said.
The news agency report said total car output in China rocketed to 1.44 million in the first three quarters, up 87.2% on a year earlier, official figures show, prompting fears of a margin-sapping glut as car makers pump billions of dollars of investment into China.
Reuters noted that Detroit’s big three – Ford, General Motors and DaimlerChrysler – added to the pressure on Wednesday, saying they would export thousands of US-made vehicles to China in the next two years.
A company executive told Reuters that VW’s market share in China, its largest market outside Germany, had dropped by about 5% from the middle of the year, but this was not a cause for alarm.
“We would have been able to sell more if we could have produced more,” Michael Wilkes, Volkswagen’s China-based spokesman, told Reuters, adding: “That we have a lower market share is also true, because we can’t grow as fast as the market grows.”
But analysts pointed to stiff competition, the news agency said, noting that Volkswagen’s rise in Chinese sales has lagged that of its main foreign competitor in the country, General Motors, whose sales were up almost 38% to 267,395 units in the January-to-September period from a year earlier.
But while Volkswagen may be losing market share, Reuters said it still remains the dominant car maker in China. GM is in second place, with just under 10% of the market, and its Chinese sales represented about 19% of Volkswagen’s 2.58 million total from January to September.
Analysts told Reuters Volkswagen was facing pressure from new products in the middle of the market, in which it has traditionally been strongest.
“Last year growth was fastest in sales of economy cars,” Gu Qing, who watches China’s car industry for Haitong Securities, told Reuters, adding: “This year it has moved up a gear, with sales fastest in the 150,000 yuan ($US18,122) to 200,000 yuan price range.”
GM’s newer Regal and Excelle have eaten into a market once dominated by Volkswagen’s Santana, Bora and Audi brands, she told Reuters.
The Shanghai-produced [Daewoo-designed] Buick Excelle, which hit the market in August, has a waiting list of about 20,000, GM has said, Reuters noted.
The news agency also noted that, earlier in the month Goldman Sachs said in a research report that Volkswagen’s margins in China in the third quarter had been cut by more than half because of increased competition and over-production.
Nonetheless, Reuters added, Volkswagen, also Europe’s largest auto maker, is investing €6 billion ($6.98 billion) to double annual production in China to 1.6 million vehicles in five years.
