China auto sales slump for first time in 2 years

Bloomberg News

China’s passenger-vehicle sales fell for the first time in more than two years as the nation’s economic growth slowed and a stock-market rout dented buying sentiment.

Retail deliveries of cars, multipurpose vehicles and SUVs fell 3.2 percent in June from a year earlier to 1.43 million units, the China Passenger Car Association said Wednesday on its website. Sales last fell in February 2013, according to the group.

Carmakers including Volkswagen AG and General Motors Co., which count China as their largest market, have cut prices to defend market share as demand slows and domestic rivals lure increasingly value-conscious customers with cheaper sport- utility vehicles. A record rally in China’s stocks turned into a rout last month, with the benchmark Shanghai Composite Index plunging more than 30 percent since June 12.

“Judging from the momentum, the second half is not looking too optimistic,” said John Zeng, Shanghai-based managing director at researcher LMC Automotive. “The growth slowdown will continue. Automakers will be more cautious in terms of production.”

Passenger-vehicle deliveries rose 8.4 percent in the first six months of the year, the association said, led by a 57 percent gain in SUV demand. Sales of sedans, the biggest category, fell 3 percent.

The slowdown in China is narrowing the growth gap with developed nations such as the U.S., where deliveries increased 4.4 percent in the first half.

The three-week slump in Chinese equities is acting like a “meat grinder” for auto demand, with consumers canceling purchases, said Cui Dongshu, secretary-general of the car association.

Chinese automakers such as Great Wall, the market leader in the SUV segment, cut prices twice last month, a sign of weak underlying sales, according to Sanford C. Bernstein & Co. More domestic carmakers are expected to follow Great Wall’s move, according to Barclays Plc.