Manufacturing News

CAAM slashes China sales growth forecast to 3% for year

Under the combined impact of China's soft economy and a stock-market rout, vehicle sales are likely to grow only 3 percent this year, an influential industry group predicts.

The China Association of Automobile Manufacturers on Friday issued a downward revision of its original forecast that sales would rise 7 percent this year. A 3 percent increase would be the smallest since 2011, when the government unwound stimulus measures unleashed in the wake of the global financial crisis.

The recent stock market rout wiped out $3.9 trillion (23.9 trillion yuan) of value, and with China's economy growing at a slower rate, concerns are rising that auto sales will slow further even as more assembly plants are opened.

"I don't think you can imagine very strong growth in the market," said Anna-Marie Baisden, London-based chief of auto analysis at BMI Research. "The second half will be worse, people would've lost money from the markets, and the whole economic situation hasn't been helping."

The revised forecast comes as Volkswagen AG, the biggest foreign carmaker in China, became the latest company to extend financial assistance to its dealers.

Dealer funding
The automaker will pay 1 billion yuan to distributors selling VW brand cars made by the company's joint venture with China FAW Group Corp., according to two people familiar with the plan.

China will see more manufacturing capacity added even with sales slowing. Hyundai Motor Co. is building two more plants in China by next year, while Renault SA has a factory set to open in the first half of next year. Fiat SpA is set to start making Jeeps in China later this year.

Cui Dongshu, secretary-general of the Passenger Car Association, a separate trade group, last week described the stock-market rout that turned a world-beating boom into a bust as a "meat grinder" that destroyed wealth that might otherwise be spent on new cars.

"China's auto market would be much more stable if there is no stock market given that it damps demand no matter whether stock prices go up or goes down," said Dong Yang, secretary-general of the China Automobile Manufacturers Association. "If people have extra money, don't invest in the stock market. It would be nicer if people use it to buy cars."

Price cuts by both foreign and local brands in the past months have done little to spur demand. A survey by MNI Indicators showing the proportion of consumers who planned to buy a car shrinking last month, while inventory was at levels that indicate low market demand for nine consecutive months.

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