Accessible auto credit and a rebounding economy may help stimulate China's auto market growth in 2012
China's year-on-year auto sales for the first six months of 2012 have been dismal. Increasing regulations, restrictive purchasing policies and a slowing economy have lead to rising inventories at dealerships nationwide.
Nonetheless, the ever-optimistic China Association of Automobile Manufacturers is forecasting wholesale deliveries could rise by as much as 11% to 16.1 million units this year. The association predicts second-half sales could increase by a healthy 15% to 8.5 million units, more than double the first-half rise increase of 7% to 7.6 million units.
Shi Jianhua, the association's deputy secretary general, predicts “China's economy will be better in the second half and that will help spur car demand.” Shi also expects pent-up consumer demand to come from people born in the 1980s who are buying a car for the first time, despite a recent survey from the association which showed first time buyers generated only 42% of vehicle purchases in the nation's top cities. Young people are also more likely to seek auto financing, which may also help stimulate a fresh round of second-half purchasing.
China faces a car stockpile Image: businessinsider.com |
However, even as China's vehicle fleet swelled from the end of 2011 to 114 million units, over-production remains a growing problem. While wholesale deliveries look flatteringly strong, retail sales are seriously under-performing.
Manufacturers continue to exert pressure on dealerships to take on more stock, forcing them into heated price wars. Some dealerships were reportedly giving 30% discounts on some models and are predicting steeper cuts in the months to come.
Average inventory days for the 16 major carmakers rose 5% month-on-month to 54 days, wth some local brands seeing stock remaining on the forecourt for up to 98 days. After Guangzhou announced its car restriction policy last month, many are concerned that more cities will follow suit, possibly jeopardising sales growth. Recently the Xi'an government announced a draft plan to control the total vehicle count, but have now temporarily shelved the idea.