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Auto sales face steep uphill in double-digit growth target
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THOUGH China’s auto market started strongly this year with a double-digit growth, industry optimists are bracing for possible speed bumps ahead.
Despite the “low season” caused by the weeklong Chinese Spring Festival in February, the combined sales of passenger cars and commercial vehicles in the first two months of this year rose 10.7 percent from a year earlier to 3.75 million units. That puts the market on track to achieve 10 percent expansion in 2014, as the China Association of Automobile Manufacturers predicts.
Though moderate by last year’s 14 percent sales increase, a 10 percent growth rate would be quite respectable, given that government anti-pollution and anti-extravagance campaigns have both put car buying squarely in their sights, the association said.
The pace of car sales would probably surpass 12 percent this year if it depended only on the country’s economic growth, car production capacity and demand level, said Su Hui, a member of the China Passenger Car Association’s expert panel. But reality is not that simple.
Current vehicle purchase restrictions imposed on megacities like Beijing, Shanghai and Guangzhou are viewed as pacesetters for many smaller cities in the fight against their own air pollution and traffic gridlock. The fact that some local governments are seriously considering following suit has caused waves of panic buying, which may become the biggest driver of sales growth this year, Su said.
In addition, sales of cars with big displacement engines, which had been on the rise in recent years, could shift down amid talk of pending consumption tax reform targeting high-polluting, luxury products, according to a source close to the Ministry of Finance.
More levels of tax charges are expected. They could take into consideration a car’s displacement and its price, though it is not yet clear how significantly such taxing rates would differ from each other.
Following the current wave of strong sales, a low tide could appear, the China Passenger Car Association said. That could trigger another fierce price war among carmakers, making competition increasingly like a zero-sum game, said auto analyst Zhang Zhiyong.
The biggest loser to date has been China’s domestic car industry, whose market share in passenger cars fell for six consecutive months since September to below 40 percent, according to the China Association of Automobile Manufacturers.
Dong Yang, the secretary-general of the state-backed association, admitted that weak innovation and competitiveness remain huge challenges for domestic carmakers still grappling in their early stages of development.
But the market isn’t standing idle while they try to sort themselves out and catch up.
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