China: stock troubles further deter consumers from auto purchases image

The world’s largest auto market is bearing the brunt of a slowdown as the economy is scheduled to slow its growth to the lowest in two and a half decades and automakers also need to worry now about the stock burn.

The massive stock slump starting mid-June has first attacked the luxury car market but its now spreading like a disease to the mass-market competitors as the consumers have to bear the cost of lost investments. Global automakers from Ford to Nissan or Volkswagen are now restating their profit and sales thresholds for the year and will gear up to bear the brunt of a sustained timeframe of sliding demand and plunging prices. That will massively impact profit, lift inventories on dealer lots and increase the already gut wrenching competition. China-based managers and executives at major global automakers say they have been pushing their employees harder than ever to meet goals that could ultimately be unattainable. The gloomy outlook of the Chinese economy was even more obvious on Tuesday when the government had to devalue the local currency due to depressing economic figures.

Volkswagen AG, the best selling car brand in China or Ford, sixth-biggest by deliveries in the country, managers are seeking new ways to deal with the future uncertainty and the necessary production planning. All the automakers involved on the local market are now using more often the so-called short-term output adjustment strategies, with suppliers coping with higher costs now. Optimism is almost nowhere to be found, but brands such as Honda or Toyota showed positive results can be achieved as they recently launched new SUVs – highly popular on the Chinese market.

Via Reuters