China, the world’s largest auto market, has been a boom for the global automakers for years – posting double-digit jumps and fat margins. But the recent slowdown of the economy has also impacted the automotive industry.

The country’s passenger vehicle deliveries dropped for the first time in at least two years last month due to the economic slowdown and the recent troubles across the stock market, both impacting consumer confidence. Retail sales of cars, multipurpose vehicles and SUVs slumped 3.2 percent in June from the same period last year to a total of 1.43 million autos, according to a statement on the website of the China Passenger Car Association. The last time sales fell in the world’s largest car market was back in February 2013, said the industry group. Global automakers such as Germany’s Volkswagen Ag and America’s General Motors, which have China as their largest worldwide market, have operated price reductions on a variety of models to try and defend market share. The demand has not only slowed, but also domestic Chinese carmakers are gaining back market share as they flooded with affordable sport utility vehicles in an effort to lure the increasingly value-conscious buyers.

“Judging from the momentum, the second half is not looking too optimistic,” comments John Zeng, Shanghai-based managing director at researcher LMC Automotive. “The growth slowdown will continue. Automakers will be more cautious in terms of production.” Automaker stocks, especially of European peers, have plunged as they are highly dependent on China, which has seen its booming stock market turn into a rout last month. Passenger-vehicle deliveries grew 8.4 percent during the first half of the year, said the industry group, thanks to a 57 percent jump in demand for SUVs.

Via Bloomberg


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