Manufacturing News

Auto market likely to cool in second half, analyst warns

After a modest uptick in the first five months, light-vehicle sales in China are likely to stagnate this summer as automakers struggle with rising inventories, a soft economy and a volatile stock market, global research firm LMC Automotive says.

In a report issued this week, LMC Automotive researcher John Zeng predicted light-vehicle sales in China will rise 5.7 percent this year, down from 10 percent in 2014.

Zeng shaved 100,000 units from his annual sales forecast after industry deliveries slipped a disappointing 1 percent in May amid relatively high inventories.

Dealerships averaged a 51-day supply of vehicles in May, up from 50 days in April.

"When we take into consideration the fluctuations in inventory levels, we have little reason for optimism, at least as far as the short©\term outlook is concerned," Zeng concluded. "With this in mind, we believe that the painful market adjustment currently under way is far from over."

Zeng said that automakers will have to cut production to prevent ballooning inventories. General Motors, Volkswagen, Ford, Hyundai and Great Wall have already cut prices.

But it's not clear yet whether automakers are prepared to delay or cancel long-term expansion plans that will bring additional light-vehicle output on line, Zeng said.

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