China new car sales slow down

Trend set to continue in 2015.

The world’s largest car market saw growth in vehicle sales half last year as the economy continued to be sluggish and manufacturers grappled with too much inventory and too much capacity.

The China Association of Automobile Manufacturers said that sales growth was just 6.9% last year, missing the 14% target and the 16% gain that was experienced in 2013. The bad news continues with forecast for this year set to be much in line with economic growth in the country, which is believed will come in at about 7.3%, the slowest pace since 1990.

However, this still means that there will be some 24 million cars delivered, almost 2 million more than last year. This increase is significant and is equal to the entire year’s delivery for more developed but smaller markets such as South Korea or France.

Not all manufacturers felt the squeeze, with GM reporting a 12% year-on-year growth, topping out at 3.54 million vehicles; but this still left them in second place to Volkswagen Group which retains the bragging rights after it too recorded a 12% growth with 3.67 million vehicles sold.

In addition to the economic deceleration, demand for cars is taking a hit from the increasing number of cities placing restrictions on car sales to tackle their worsening air pollution and traffic problems. In December, the affluent southern city of Shenzhen joined other urban centers in curbing car purchases. The city now caps the number of new cars at 100,000 vehicles a year, less than half of an estimated 250,000 new vehicles sold in 2014. Other cities that might follow suit this year include Chengdu, Suzhou, Nanjing and Xian, said Ways Consulting Co., a Guangzhou-based consulting firm focused on the Chinese automotive industry. Each of the cities has had more than 100 autos per kilometer on the road, said the consultancy, adding that the four cities sold more than 1.2 million new cars in the first 10 months of 2014.