Colum Murphy
DETROIT--China's auto industry faces a second straight year of
weaker growth after a sharp 2014 slowdown, according to an industry
association and analysts, as car makers continue to grapple with a
cooling economy and rising inventories.
The China Association of Automobile Manufacturers said Monday
that it expects passenger-vehicle sales to rise 8% to 21.3 million
vehicles this year, compared with 9.9% growth in 2014. While that
pace is stronger than current outlooks for Europe and the U.S., it
still marks a sharp slowdown from a 16% gain in 2013 and even
higher rates in some previous years.
Jochen Siebert, managing director of consulting firm JSC
Automotive, said Western auto makers get such a large share of
profits from China, slower gains "could be a slap in their face as
the market begins to stall and regulators put an end to
extraordinary profits in the aftermarket business."
Consultant IHS Automotive estimates that in 2013 China
contributed about 59% of net profit at Volkswagen AG, 45% at BMW AG
and 37% at General Motors Co. The car makers don't separately
disclose China profits.
BMW said China accounts for between 20% and 30% of its
automotive-segment earnings, which excludes finance arm earnings.
Ian Robertson, the German luxury-car maker's global sales and
marketing chief, said in an interview at the Detroit auto show that
he expects BMW sales in China to rise at a moderate
single-digit-percentage rate this year. Mr. Robertson said growth
also was shifting among car segments, for example, to smaller
luxury cars from larger models.
Volvo Car Corp. Chief Executive Håkan Samuelsson said it is
important not to "over exaggerate" the effects of China's slowdown.
"It's going to be tougher," he said. "But there is still solid
growth," he added.
Mr. Samuelsson said growth in China's premium-car market in 2015
of between 5% and 10% would be "more realistic." Volvo expects its
growth would outperform, but wouldn't be as high as when its sales
rose about 35% in 2014.
Analysts expect China's slowing growth will weigh on auto sales
over the course of the year. China's gross domestic product is
widely expected to rise 7.3% in 2014, the weakest since 1990, and
further deceleration is likely, said economists.
"Sales growth of sedans has almost stalled in recent months
because buyers of sedans are very vulnerable to the economic
situation," said Yale Zhang, managing director of consulting firm
Automotive Foresight. In 2014, China's sedan sales rose only 3%
from a year earlier to 12.4 million cars.
Dealers including Xie Zongwei agree. "People are asking for
greater discounts. I feel it's getting more difficult to sell
cars," said Mr. Xie, who sells Chevrolet, Hyundai and Geely
vehicles in Hebei province.
The China auto association offers a somewhat brighter outlook
for commercial vehicles, which are more dependent on the property
market. Overall, the group expects total sales of passenger and
commercial vehicles to rise 7% to 25.13 million this year, compared
with 6.9% last year.
The industry group's estimates are largely in line with those of
analysts. Business Monitor International, a unit of
information-services firm Fitch Group, expects growth in China's
passenger-car sales to slow to 7% this year. LMC Automotive
forecasts a 9% rise for the passenger-car market and IHS Automotive
forecasts an 8% rise.
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.
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.
The association's figures track vehicles shipped to dealers
rather than sold to consumers, and rising inventories in dealer
lots suggest more cars are going unsold.
Dealers for some foreign car brands, including BMW, have
complained about what they called too-high sales targets and have
demanded financial support from car makers to tide them through the
slowdown.
Johan de Nysschen, president of General Motors' Cadillac unit,
said dealers for the brand in China hadn't asked for such payments.
"[But] we should anticipate it. Dealers for all franchises have
taken note of this development," he said.
The latest data from the China Automobile Dealers Association
show that stockpiles at China's more than 22,000 dealerships jumped
to 55 days in November, up from 44 days in October and the highest
level since June 2012.
Bill Russo, managing director of consulting firm Gao Feng
Advisory, advised against car companies putting all of their eggs
in the China basket. But he said there weren't too many options.
"If you're a global auto maker, where else can you go for growth
other than China?"
Rose Yu and Lilian Lin contributed to this article.
Write to Rose Yu at rose.yu@wsj.com
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