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2009 a tough year for China's auto industry

By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2008-10-20 17:27

China's automobile industry, which is suffering from the global financial crisis and the country's macroeconomic adjustment, should expect another tough year in 2009, experts and auto dealers predicted.

"The country's overall economic growth, which is expected to fall in 2009, will have a negative impact on China's auto industry," Xu Changming, an auto analyst at the State Information Center, a Chinese government think tank, said at an industry seminar on October 15 in Beijing.

The slowing world economy, pummeled by the global financial crisis and weaker demand for Chinese exports on international markets, has weighed heavily on the Chinese economy. In the third quarter, GDP growth rate slowed down to 9 percent, the lowest in five years. It had been 10.6 percent in the first quarter, 10.1 percent for the second quarter and 10.4 percent in the first half of 2008, according to statistics from the National Bureau of Statistics.

Huang Kun, chairman of Beijing Jingbaohang Automotive Sales & Services Co Ltd, a BMW auto dealer in Beijing, also took a gloomy view of China's auto market in 2009.

"Fast depreciating US dollars make more imported vehicles cheaper in the Chinese market, resulting in falling production at joint venture automakers," Huang told chinadaily.com.cn.

The US dollar depreciation also has had a huge impact on China's auto industry, especially independent brands, Huang added. He also said rising global oil prices and China's fuel tax, which is expected to be launched, will make auto consumption a more expensive option, dampening a batch of would-be auto buyers.

"A considerable proportion of auto dealers are running at a loss, only 20 percent of them may be profiting," said Luo Lei, deputy secretary general of the China Automobile Dealers Association.

In addition, many other uncertainties are clouding the industry, making the future of the sector mixed and complicated, said Ding Hongxiang, chairman and general manager of China Trading Center For Automobile Import. "It is still unknown what the development of US financial crisis will be and what policies the Chinese government will launch to cope with the crunch," Ding added.

Even if the crisis spreads and Chinese economy slows down, many automakers will continue to expand their production capacity despite a high inventory. It has brought huge capital pressure to dealers, according to Ding.

China sold 751,500 motor vehicles nationwide in September, representing a growth of 19.48 percent from the previous month but a decline of 2.74 percent from the same month of last year, the China Associations of Automobile Manufacturers said.

The country's vehicle sales posted the first year-on-year decline this year in August. And although many insiders estimated a decline would not occur in the traditional boom month of September, it did.

In the long term, the auto industry is full of hope in China, as the number of cars per 1,000 people is only 22 at present, far lower than in developed countries, demonstrating huge auto consumption potential, said Xu Changming.