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China Auto Market Keeps Growing, But at Modest Rate — WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 12, 2017).

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SHANGHAI — China’s car market sustained its recent run of growth in August, continuing to expand after a weak start to the year brought about by a rise in the country’s auto-sales tax.

Total vehicle sales increased 5.3% compared with August 2016 to 2.19 million, the government-backed China Association of Automobile Manufacturers said Monday. That is consistent with the 6.2% expansion recorded in July, and with June’s 4.5% growth.

Even so, the manufacturers’ association struck a bearish tone, warning for the first time that the Chinese auto sector would likely fall short of the 5% growth forecast it made in January, saying the increasing maturity of the Chinese market all but rules out anything beyond modest single-digit growth.

“The 5% target set at the start of the year now looks like being a very idealistic goal,” said Shi Jianhua, the association’s deputy secretary general, adding that “growth of about 4% is still possible.”

The Chinese auto market grew 4.3% in the first eight months of the year — a jarring slowdown for a market that grew 13.7% last year, buoyed by strong passenger-car sales, which were up 15.9%.

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This year, in contrast, passenger-car sales have dragged back the sector’s expansion. They increased only 2.2% during the January to August period, although August sales of 1.88 million, up 4.1%, beat this year’s average.

Sales of commercial vehicles, up 16.9% so far this year and up 12.8% in August, improved the overall picture.

The sector’s slowing growth comes against a backdrop of uncertainty for foreign manufacturers, especially with regard to new regulations mandating electric-car production.

Draft versions of these rules suggest they could come into force as early as next year, and most auto makers are scrambling to adapt, even though the final regulations have yet to be announced.

Beijing’s seriousness about shifting to electric vehicles was underscored Saturday with confirmation that China is planning to impose a deadline to end the sale of gasoline and diesel-powered vehicles — a measure recently outlined by France and the U.K., which have both announced 2040 as the endpoint for the sale of such cars.

Xin Guobin, the vice minister of industry and information technology, said at an auto-industry event that the government is developing a timetable to phase out gas and diesel vehicles, but didn’t say when China’s ban might come into force.

Despite these uncertainties, some auto makers have managed to shrug off China’s growth slowdown, with Japanese firms enjoying strong sales.

Honda Motor Co. has surged in 2017: it is now China’s third-largest auto brand in terms of sales volumes, and also the third-largest foreign manufacturer in China, behind Volkswagen AG and General Motors Co.

Its August sales increased more than 20% year-on-year, while its January-August sales rose 18%, to 884,461 vehicles.

Other Japanese auto makers were close on Honda’s tail. Nissan Motor Co.’s sales rose 18% in August, and 9% in the first eight months of the year to 877,638 vehicles. Toyota Motor Corp.’s monthly sales were up 13% year-on-year, with January-August sales increasing 7% to 841,400 vehicles.

General Motors Co. appears to have put a slow start to the year in China behind it. August sales were up 12% year-on-year, building on single-digit growth in June and July. As a result, GM’s sales growth for the year has now edged into positive territory, up 0.3% in the first eight months of the year, with more than 2.38 million total vehicle sales.

A second-half rebound continues to elude Ford Motor Co., however. Ford’s August sales were down 1% year-on-year, with January-August sales of 719,859 vehicles a 6% decline compared with the same period in 2016.

Auto makers looking for a wider market revival to boost their own fortunes won’t find relief any time soon, warned Chen Shihua, the assistant secretary general of the manufacturers’ association.

“Looking ahead, auto sales face increased pressure,” Mr. Chen said, warning that next month’s sales figures, which will be set against a record-breaking September 2016 performance, are likely to disappoint.

Liyan Qi contributed to this article.

Write to Trefor Moss at Trefor.Moss@wsj.com

(END) Dow Jones Newswires

September 12, 2017 02:47 ET (06:47 GMT)

Article source: http://www.foxbusiness.com/features/2017/09/12/china-auto-market-keeps-growing-but-at-modest-rate-wsj.html

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