China’s First-Half Sales Growth Downshifts to 2.9%

Chinese new-vehicle sales grew only 2.9% in the year’s first half to 9.6 million units, with domestic brands bearing the brunt of the slowdown.

The government news agency Xinhua reports data from the China Association of Automobile Manufacturers showing the latest results compare unfavorably with a 3.4% year-ago gain and a 48% spike in first-half 2010.

First-half sales by Chinese auto makers fell 2.0% to 3.15 million units, trimming three percentage points off their share of the passenger-car market to 41.4%.

CAAM General Secretary Dong Yang says half of China's domestic auto brands may be wiped out over the next few years because their slow sales are unlikely to reverse.

“Nearly every local brand has suffered sluggish sales since January,” Geely Deputy Sales General Manager Huang Haitao is quoted as saying. “Both sales volume and market share have slipped.”

Xinhua says many sales mangers worry about reaching this year's sales targets.

“The modest growth in the first half hurt every domestic car maker,” Jianghuai Automobile Regional ManagerXiao Lumansays. “There will be no decrease in pressure in the second half.”

Xiao says he’s even more concerned about next year, as a slowing economy and purchase limits will continue to cut into sales. Second-quarter gross domestic product growth eased to 7.6%.

China’s three biggest cities now restrict vehicle purchases after Guangzhou joined Beijing and Shanghai in limiting the number of license plates they will issue each year.

Xinhua says foreign auto makers’ Chinese sales have grown faster than the overall market as they offset domestic brands’ price advantage with steep price cuts, making locally built cars less appealing than more-advanced foreign models.

Northeast China domestic auto dealer Yu Yanjun says he’s concerned by foreign encroachment upon the local market.  “In addition to the price cuts, global auto makers have rapidly expanded their sales network,” he tells Xinhua. “They are devouring market share, even in small cities and towns.”

Sun Zhiming, dean of the economics center of the Academy of Social Sciences in Jilin province, says China's homegrown auto makers need to hit the accelerator and boost themselves now.

“Domestic car makers can no longer survive simply by copying popular car designs,” he says. “It's time to really consider the core quality of the companies.”