Trio of troubles in slowing sales, excess capacity, rising competition



About 300 robots assemble vehicles at a Beijing Hyundai Motor factory in Cangzhou, North China's Hebei Province in February 2017. Photo: VCG


Prospects for China's automobile industry may be dim in 2018, given that sales have already slowed in recent months - and that's before a rise in the car purchase tax in the new year.


"I'm not very optimistic about the prospects of the automobile market in 2018, particularly with a rebound of the car purchase tax and reduced subsidies for new-energy cars. But a plunge in sales is equally unlikely," Wu Shuocheng, a Shanghai-based independent analyst, told the Global Times on Monday.


In 2018, conditions will be about the same as this year or slightly worse, Wu noted, but there will still be some time until the market is "saturated."


As of January 1, 2018, the purchase tax on 1.6L and lower-sized-engine passenger cars will be returned to 10 percent from the current 7.5 percent, according to a statement the Ministry of Finance released in December 2016.


Total vehicle sales in China rose 3.6 percent in the first 11 months, down 10.5 percentage points from the year-earlier period, data from the China Association of Automobile Manufacturers showed. Even worse, the growth rate of passenger vehicle sales slowed to 1.9 percent from 15.6 percent the same period last year.

中国汽车工业协会(China Association of Automobile Manufacturers)的数据显示,今年前11个月,中国汽车总销量同比增长3.6%,较上年同期下降10.5个百分点。更糟糕的是,乘用车销量的增长率从去年同期的15.6%降至1.9%。

Sales of South Korean and French brands' passenger vehicles sank in the first 11 months of this year to 969,300 (down 38.2 percent) and 399,900 (down 28.2 percent).


Those slumps are seen by some industry observers as an early warning of broader problems for the industry, along with an increasingly fierce price war. Some even speak of "gray rhinos" lurking in China's vehicle sector in 2018.


The term "gray rhino" was popularized by US policy analyst Michele Wucker in her 2016 book, The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore, where she uses it to depict big, neglected dangers that are actually highly predictable.

“灰犀牛”一词在美国政策分析师Michele Wucker的2016年着作“灰犀牛:如何认识并行动我们忽略的明显危险” ,在那里她用它来描绘实际上高度可预测的大的,被忽视的危险。

Cui Dongshu, secretary-general of the China Passenger Car Association, said some factors that are seen as potential risks, like price wars and an inventory buildup, have existed for quite some time and therefore cannot be deemed as "gray rhinos."


"In 2017, the flow of capital into the real estate market caused demand to decrease in the automobile market, which was a 'gray rhino' event. The impact from 'gray rhinos' on the car market was a little serious this year," Cui told the Global Times on Monday.


He said the car market should even rebound a bit in 2018, particularly as the government still needs it to prop up the economy.


Some automakers have been introducing new models with lower prices, but a broad price decline is unlikely, according to experts.


On Wednesday, Changan Automobile Co launched its latest models of the Raeton CC in Wuzhen, East China's Zhejiang Province, with sticker prices ranging from 89,900 yuan ($13,736) to 138,900 yuan. The price of Raeton CC is about 30,000 yuan less than that of the Geely-GC9, an automobile in the same class.

周三,长安汽车公司在中国浙江省东部的乌镇推出了最新型号的Raeton CC,标价从89,900元(13736元)至13.89万元不等。Raeton CC的价格比相同级别的汽车Geely-GC9少了三万元。

Beijing Hyundai Motor Co launched the next-generation ix35 in Guangzhou, capital of South China's Guangdong Province, on November 15, at a price about 30,000 yuan less than the previous generation.


However, Cui said, there is no general downtrend in prices.


But he noted that because of fierce competition and excess capacity in the industry, some smaller producers, such as certain private ones and weaker brands under some State-owned automakers, might be driven out of the market next year.


China's vehicle industry will have overcapacity of 20 million units by 2020, according to domestic news site


Of particular note, plenty of capital and other resources have been poured into the new-energy sector, but it's unclear whether there will be adequate production and practical benefits, Wu said.