Manufacturing News

Auto sales hit 17-month low as discounts fail to attract buyers

Chinese consumers bought the fewest passenger vehicles in 17 months in July, extending a slump in the world's largest auto market as deeper discounts failed to revive demand.

Retail deliveries declined 2.5 percent to 1.3 million units, the lowest level since February 2014, according to the China Passenger Car Association. Sedan sales tumbled 14 percent, while sport utility vehicles deliveries climbed 39 percent.

Automakers are cutting production in China and warning of a looming price war as a slowing economy and government curbs on registrations weigh on demand. Dealerships are offering incentives at an unprecedented scale to move cars off their parking lots, according to the China Automobile Dealers Association.

"It is stunning to see how much profit margins dealers are sacrificing in order to sell cars," said Luo Lei, a deputy secretary-general at the State-backed dealers group. The level of discounting is "shocking", he said.

Discounts of at least 30 percent are being offered in major cities on hundreds of models, according to Autohome, a popular car-pricing portal.

Besides reducing prices, carmakers and dealers are offering incentives such as subsidized insurance, zero down-payments, interest-free financing and boosting trade-in prices, according to brokerage Sanford C Bernstein & Co.

BMW AG said earlier this month that a sharp slowdown in Chinese demand may force it to revise its profitability goals. General Motors Co reported a 4 percent drop in July deliveries, while Ford Motor Co predicted industrywide sales may decline this year for the first time since at least 1998.

Others like Mazda Motor Corp and PSA Peugeot Citroen have warned looming price wars in China, as a surfeit of brands compete for buyers amid a slowing economy and volatile stock market.

Even Great Wall Motor Co, the biggest sport utility vehicle maker in China and a beneficiary of the shift in demand to budget models, has stumbled. Its July deliveries slid 1.7 percent, led by its most popular model, the H6.

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