China Car Sales Keep Falling as Peak Season Fails to Deliver

This post was originally published on this site

(Bloomberg) — China’s car-market gloom continued in October as the traditional post-holiday demand peak failed to materialize, leaving automakers with few easy answers to attract buyers back to showrooms.

Sales of sedans, sport utility vehicles, minivans and multipurpose vehicles dropped 6% from a year earlier to 1.87 million units, the China Passenger Car Association said Friday. The decline was the 16th in the past 17 months, with the only increase coming this June as dealers offered large discounts to clear inventory.

The period known as “Golden September, Silver October” is typically strong for carmakers as consumers like to make big-ticket purchases during the harvest season. Not this year though, underscoring the depth of the historic slump the car industry is mired in.

Demand in the world’s biggest car market has been hurt by a slowing economy that’s made consumers curb spending. Measures by the government to boost consumption have yet to help, leaving automakers’ profitability challenged and prompting industry insiders to predict mergers and market exits.

Global carmakers such as Volkswagen (DE:) AG and Honda Motor Co. have weathered the slowdown better than some other international brands, which are sputtering along with cheaper local companies due to the cooling demand. Deliveries of local brands fell 12% in October, the PCA’s secretary general Cui Dongshu said Friday.

Chongqing Changan Automobile Co., a local partner of France’s PSA Group, said last month it plans to sell all of its shares in a 50-50 joint venture after the assembler sold fewer than 4,000 DS cars last year in the country.

China’s hundreds of aspiring electric-vehicle makers are also struggling to convince buyers that it’s worth paying higher prices than opting for cheaper gas guzzlers. Electric-car sales fell for three straight months through September, as the government — after spending billions of yuan to nurture the industry — scaled back subsidies. The PCA said Friday that deliveries of new energy vehicles to dealerships slid 45% to 66,000 units last month.

Warren Buffett-backed BYD Co., the country’s biggest maker of new energy vehicles — all-electric, fuel-cell and plugin hybrid cars — last month reported an 89% slump in third-quarter earnings and warned profit could fall as much as 43% this year. BAIC BluePark New Energy Technology Co., China’s biggest maker of all-electric automobiles, also forecast a 2019 loss in a grim earnings update.

China’s Vehicle Inventory Alert Index stood at 62.4% last month, the second-highest level this year, signaling dealers face rising operational pressure, according to the China Automobile Dealers Association. A reading above 50% indicates high inventory.

Amid the gloomy picture, the silver lining lies with makers of luxury cars and Japanese brand vehicle makers such as Honda, which had a 6.5% sales gain in China last month. Sales by Volvo Cars surged 27% in October to 11,083 units, according to the company. Industrywide sales of luxury brands rose 14% last month, according to the PCA.

Some analysts are also predicting a gradual stabilization in the Chinese market as year-on-year comparisons become easier.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.