A model stands next to an energy-saving car at an auto expo in Beijing.[Photo by Shu Hua/China Daily]

Uncertain economic hurting car demand, says industry body

Vehicle sales in China, the world's largest car market, surged to a record 24.6 million units last year, but at a much lower growth rate, as demand waned due to uncertain economic conditions.

Passenger vehicle sales grew 7.3 percent year-on-year to 21.1 million units in 2015, while that of commercial vehicles declined by 10 percent. Demand for trucks dropped by 11.4 percent, according to the China Association of Automobile Manufacturers.

According to industry data released on Tuesday, the growth rate in 2015 was 4.7 percent, a three-year low, largely due to slowing economic growth and volatile stock markets.

Other factors which contributed to the lower growth were the restrictions imposed by local governments on issue of license plates for newly purchased vehicles and for used vehicles transferred from other cities, the ending of the 3,000 yuan ($455) subsidy for energy saving cars and dwindling overseas demand for Chinese exports.

Growth in the sales of passenger vehicles slowed continuously during the first eight months and even flattened in August. However, tax incentives introduced for purchase of smaller-engine vehicles in September helped kick-start the moribund sales, it said.

Dong Yang, executive vice-president of CAAM, said: "Sales of 1.6-liter and lesser category passenger vehicles surged in the fourth quarter. This demonstrates the continued strong demand for passenger cars. We expect the momentum to continue, as long as fresh policies do not crimp growth," he said.

Sports Utility Vehicles continued to be the mainstay of the industry and accounted for 25.2 percent of the total automobile sales last year. SUV sales topped 6.2 million units, a 52.4 percent growth over the corresponding period in 2014. Sales of Multiple Purpose Vehicles grew 10 percent, but that of sedans, hatchbacks and vans dropped, the CAAM report said.

Dong said: "Sales of imported cars and luxury cars dropped significantly due to the ongoing austerity measures and the graft crackdown."

Among foreign brands, Mercedes-Benz was one of the brands that clocked excellent sales in the premium segment. This was fueled by the launch of 14 locally produced and imported models, including GLA, GLC and GLE SUVs. The brand had annual sales of over 363,000 units and a growth rate of 35 percent last year in China.

Wu Song, general manager of GAC Motor Co, a Chinese carmaker based in Guangdong province, said the overall market slowdown would provide more opportunities for domestic carmakers.

"We don't see the current slowdown as a grim situation for domestic carmakers. There is still huge potential for growth through self-innovation and development," he said.

The company, a division of Guangzhou Automotive Group, sold more than 190,000 units in 2015, a year-on-year growth of 63 percent, thanks to the launch of a series of self-developed vehicles.

According to Wu, the company will launch more varieties this year to meet the growing demand for high-end cars and more units would be exported to the Middle East, a market focusing on luxury brands.

"Boosting global presence would help increase Chinese brands and create a new era for domestic cars," Wu said.

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