Sales slide in China, world's largest car market: Assessing factors for slump
- The need to bolster domestic consumption is being highlighted as the need of the hour to arrest the slide in Chinese domestic car sales.
Car sales have tumbled for the second straight month in China, world's largest automobile market. And indications are that the slide is likely to continue in the coming times. This has emerged as a major concern for not just a long list of local players but most of the global automotive giants who focus on the Chinese markets to bolster their respective global sales and outlook.
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Car sales fell by 5.2 per cent in the month of July as per data released by the local industry and reported by Nikkei Asia. As per the China Association of Automobile Manufacturers, around 22.6 lakh vehicles were sold overall in the country last month of which 17.9 lakh units were sold in the domestic market. The decline in sales of the domestic market is more stark - at 10.1 per cent. What is interesting though is that sales of new energy vehicles or NEVs (this includes EVs and hybrids) rose by 31.6 per cent to 8.53 lakh units but what brought the overall market down was a very profound fall of 34.1 per cent (7.42 lakh) in sales of vehicles powered by internal combustion engines.
So what is plaguing the Chinese automotive market, one that impacts the global automotive scene deeply?
There has always been a tussle between local and global players competing with one another for a larger say in the lucrative Chinese automotive market. But in recent months, the competition has heated up more still even though demand has not gone up to accommodate all. A plethora of options for the potential Chinese buyer - what with even consumer electronics' companies like Huawei and Xiaomi also playing the field - has meant that many customers are taking longer to assess and thereby make the final purchase.
While global demand for electric vehicles or EVs has declined, China still remains warm towards what it refers to as NEVs or new energy vehicles. The category includes both EVs as well as hybrids of all kinds. But what has also happened in the Chinese market is sales of internal combustion engine or ICE models coming down which could be impacting the overall volumes.
The Chinese are just not spending the way they used to earlier. And it is a problem. There is a need that is being underlined to stimulate consumption. “Economic development has entered a new stage where total demand . . . is no longer as robust as before,” Yiping Huang, an economist and advisor to the country's central bank was quoted as saying in a report by Financial Times. The same report also points to concerns that the political establishment in the country is focusing way too much on investments in manufacturing at a time when there is weak household demand. This is creating a problem of overcapacity at factories and distorting labour markets.
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