Tags: China | Auto | Growth | Fuel

China Auto Sales May Miss Growth Goal on Economy, Fuel Costs

Tuesday, 20 March 2012 09:03 AM

China’s vehicle sales this year will probably miss their 8 percent growth forecast as the slowing economy and rising fuel costs curb buying, said an official at the state-backed auto association. Bayerische Motoren Werke AG, Daimler AG and Volkswagen AG shares dropped.

Total vehicle deliveries may fail to increase by even 5 percent because of the “difficult” economic backdrop, Gu Xianghua, deputy secretary general of the China Association of Automobile Manufacturers, said today, citing his personal opinion. Demand for commercial automobiles may be affected the most, falling as much as 8 percent, Gu said.

Less than 5 percent growth would result in China’s auto market expanding at a slower pace than the estimated increases in the U.S., Japan and India. Pessimism is mounting over sales in the world’s largest auto market after Premier Wen Jiabao this month forecast gross domestic product may expand 7.5 percent, the lowest target since 2004, and fuel prices were increased for the second time in less than six weeks today.

“The slowing macro-economy will make it difficult to secure loans for commercial vehicles, restrictions on car ownership such as in Beijing, and car ownership costs such as fuel and parking fees are increasing,” said Gu, who was speaking at a conference in the eastern Chinese port city of Qingdao. “All these factors will have an impact on car buying in China.”

Chinese auto sales, which jumped more than fivefold in the last decade, may increase at a slower pace than the economy if Gu’s projection is realized. Passenger-car sales had their worst two-month start in seven years in January and February, declining 4.4 percent to 2.37 million units, according to the association’s data.

‘Big Difficulties’

Gu’s estimate falls short of the 7.8 percent growth estimated at Macquarie Group Ltd. Global vehicle sales growth will probably accelerate to 4.6 percent this year from 4.1 percent in 2011, led by a 7.2 percent increase in the U.S., 20 percent expansion in Japan and a 10 percent advance in India, according to Macquarie estimates this month.

The deputy secretary general’s comments come less than a month after the the association’s Vice Secretary-General Xiong Chuanlin, who ranks one level below Gu, said the state-backed group may adjust its growth forecast for 2012. Minister of Industry and Information Technology Miao Wei told reporters on March 8 that auto manufacturers will have “big difficulties” delivering as many cars in China as CAAM projected for this year. CAAM is the acronym for the auto association.

Shrinking Sales

Total sales including cars, trucks and buses in January and February shrank 6 percent from a year earlier, according to CAAM data. The group on Jan. 12 forecast deliveries would reach 20 million this year, which would make China the first country to ever do so.

A slowing China may deal a blow to global carmakers such as General Motors Co. and Volkswagen, which are bracing for a drop in demand in Europe because of the region’s sovereign debt crisis. China is the biggest single market for automakers ranging from GM to luxury carmakers such as Audi AG, Volkswagen’s premium brand and sportscar maker Lamborghini SpA.

BMW declined as much as 3.89 euros, or 5.4 percent, to 67.95 euros and was down 4.5 percent as of 12:15 p.m. in Frankfurt trading. Daimler was 4.8 percent lower at 44.84 euros and VW fell 4.6 percent to 132.75 euros.

Passenger vehicle demand in China, which includes sedans, sport-utility vehicles, multi-purpose vehicles and minibuses, may grow between 5 percent to 8 percent, Gu said. China is unlikely to introduce “aggressive” policies to boost or suppress buying, and would prefer to use indirect incentives such as reducing road tolls, he said.

Fuel Costs

Fuel costs and ownership restrictions are also deterring purchases. China, the world’s largest oil consumer after the U.S., increased prices of gasoline by 7 percent and 7.8 percent for diesel, the biggest price increases in more than two years, according to data compiled by Bloomberg.

The increase may result in weaker demand from the “working-class population” in the short term, Gu said. Even so, China is working to improve the fuel efficiency of its vehicles in the long term, he said.

Beijing, ranked as having the world’s worst traffic, introduced measures in 2011 including limiting the number of new passenger vehicles in the Chinese capital to ease congested roads.

The slowdown in the market has also affected luxury car sales, a segment whose growth has outperformed the overall market over the last two years. Dealers for high-end car marques such as Mercedes Benz, Audi and BMW are dangling the biggest discounts seen since 2009 as competition intensifies and demand growth weakens.

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Tuesday, 20 March 2012 09:03 AM
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