Passenger vehicle demand in China is seen dropping slightly this year according to one forecaster.
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JD Power and Associates (JDP) has reduced its forecast to 5.95m units, a 4% decrease from the 6.2m units predicted at the beginning of the year.
The revised forecast is nonetheless a 9.7% increase from 5.42m in 2007 but it marks the first time since 2003 that the growth from the previous year is below 10%.
Year-over-year sales of cars, SUVs and minivans increased by only 8% in April, 15% in May, and 17% in June, compared with first-quarter growth of 21%.
Several factors are believed to have contributed to the slowing growth, according to JDP.
The Shanghai Stock Exchange Composite Index has dropped from a peak of about 6,100 in October 2007 to 2,700 in July 2008.
Inflation is running at 7-8% in China, impacting consumers’ disposable income.
Exports appear to be slowing somewhat, due primarily to economic difficulties in the United States and appreciation of the Chinese yuan against the dollar. This affects the purchasing power of factory owners and workers whose businesses depend on exports.
A massive earthquake in Sichuan province in early May affected new vehicle demand in the provincial capital of Chengdu, China’s fourth-largest city market.
And the government increased petrol prices at the pump about 17% in June.
For the first six months of the year, wholesale deliveries of vehicles from car factories to dealerships were up 17%, but car dealers surveyed by JDP said sales were flat and that some inventory was building.
“Car dealers in Shanghai, Beijing and Shenzhen reported lacklustre demand for new vehicles,” said John Bonnell, director of JD Power Asia-Pacific Forecasting.
“Ebbing consumer confidence, coupled with higher gas prices, is likely keeping many shoppers out of the showrooms.”
On 19 June 19, the Chinese government – which controls fuel pricing through its state-owned oil companies – opted to increase the price of fuel at the pump about 17% nationwide. The increase means Chinese drivers now pay approximately US$3.36 a gallon, up from $2.85.
“After the increase in the price of gas, look for Chinese buyers to become more discerning about the vehicles they buy,” said Bonnell. “Much like American consumers, Chinese buyers will look for models that offer adequate size and better [fuel economy]. The five best-selling models in China this year are all powered by engines smaller than 1.8 litres.”
China’s total year-to-date 2008 passenger car sales to the end of June reached 3m units – up 18% from the 2.6m units sold during the same period in 2007.
