Car sales fall again in the world's largest vehicle market. Here's possibly why

The alarm bells may not be ringing yet but concerns sure are rising in the Chinese car market as sales continued to tumble for the second straight month in July. The world's largest vehicle market saw close to 18 lakh car units being sold last month, down by about 2.6 per cent from figures of July of 2022.

Data from China Passenger Car Association (CPCA) reveals that July was the second month on the trot that car sales fell in the country. June of this year had seen a tumble of 2.9 per cent vis-a-vis June of 2022. While overall car sales in the first seven months of 2023 is still 1.7 per cent higher than the first seven months of last year, the sliding graph in June and July is a strong indication that cheer may be some distance away.

Competition among global and local players in the Chinese vehicle market is enormous. While opportunities may be big, the fierce rivalry has led to customers having a plethora of options across powertrains, body types and price brackets to choose from. But what if customers aren't as willing to buy as before?

Support for fair winds

The Chinese government has taken a number of steps to bolster sales of passenger vehicles in the country, especially models powered by batteries. Discounts and incentives are being rolled out to entice buyers while there is an increased focus in taking EVs in particular to untapped rural markets. The support infrastructure is also being looked at with charging stations and points planned in far-flung parts of the vast country.

Local administrations too are reportedly offering a number of incentives like free parking spaces, zero or discounted registration charges and free charging facilities to bolster demand. And while most of thee measures have worked to some extent, the overall benefit for the industry is yet to be seen.

The Chinese economy - the second largest in the world, behind the US - isn't exactly at its healthiest point. The period just after the pandemic saw a boom but the bang has ebbed since. A prolonged slump in the housing market is another indication of people largely holding on to their financial reserves rather than going for big-ticket purchases.

Eyeing the foreign pie

The stuttering demand for cars in China comes at a time when many local players are looking at invading foreign shores. Exports increased by as much as 63 per cent in July vis-a-vis July of 2022. Exports had increased by 56 per cent in June on a year-on-year basis. SAIC’s MG and Geely’s Polestar are some of the key players while others like XPeng are continuing to make efforts.

Brand awareness is still largely missing for Chinese companies in Europe but it may also be about brand perception. And yet, Made-in-China models are finding more showroom and road space in many European markets.