China Auto Market Pulled By Weakening Economy, Purchasing Restrictions

Cameron Aubernon
by Cameron Aubernon

A weakening local economy and increasing purchasing restrictions could put a hamper on automotive sales in China according to the analysts at LMC Automotive.

Just-Auto reports light vehicle sales in March 2014 — totalling 2.03 million — were lower than those in January and February, prompting a 10 percent decline in growth during Q1 2014 over the same period last year. In addition, momentum from Q4 2013 failed to carry over into the next quarter, as the selling rate peak of 23.3 million in the last two months of the previous year fell to an average of 23.1 million.

The cause of the peak, however, could throw sales into a roller coaster. Purchasing restrictions in cities such as Beijing, Tianjin and Hangzhou — enacted to help combat air pollution by selling a set number of license plates per year — stirred a wave of panic-buying during Q4 2013, and with the potential for more to come — especially if new restrictions come quickly — another wave of panic-buying could precede a sales slump, followed by another sales spike.

Amplifying this effect, China’s economy has been in a slump as of late, with yearly GDP growth dropping to 7.4 percent YoY Q1 2014 from 7.7 percent in the previous quarter. Manufacutring, sales and exports all declined, along with property prices in smaller cities. In response, the government plans to boost stimulus measures, though they may only be effective in the near-term as the nation’s investment-driven economy model approaches its limits.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

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  • Superdessucke Superdessucke on May 02, 2014

    Great that they want to reduce pollution but they may want to start with their giant coal burning factories!

  • Xeranar Xeranar on May 02, 2014

    As compared to most of the authors here I have to give credit, Cameron seems to have a fair appreciation for economics. I'm not sure what China can do to avoid the obvious contraction phase that is coming besides to keep trying to use their state controls to enact keynesian economics (since they aren't going to do socialism...because they're not socialists or communists for that matter...). This is what happens when you drive an agrarian society into the industrial II state in a matter of 50 years. There is bound to be a crash and we're likely to be seeing the beginnings of it now. Not that they don't have a great deal of surplus cash and assets to deal with it but their markets have been hot for nearly 2 decades, far hotter than they should be. The fact they've been able to out pace inflation by nearly double (or triple in some years) is amazing but the car market that relies more on consumer consumption power than state support is going to take the hit first.

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    • RobertRyan RobertRyan on May 02, 2014

      About two years ago , economists were warning about the housing bubble in China as a result of more people moving from the farms to the cities. problem is if their is a crash it will reverberate in North America and Europe as a lot of Automobile companies are now relying on China for massive growth.

  • Big Al from Oz Big Al from Oz on May 02, 2014

    @Superdessucke I don't have a Utopian Chinese vision. I'm a realist. China will not get cut off at the knees. How can this be so, are OECD economies cut off at the knees? Why is China different than the US? Is the US cut off at the knees (yet)? My comment is challenging the commenters on TTAC who dismiss China. Niky made a comment about other countries challenging China, I do agree. But China will become like the US, in that it's size will dictate even global trends. Whether this is good or bad has nothing to do with my comments. It appear the guys who, display the fanboi attitudes are the ones who have the most difficulty adapting to a different vision of the world. China will become the largest and most influential market in the auto industry within a couple of decades. That's a reality.

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    • RobertRyan RobertRyan on May 03, 2014

      @Big Al from Oz "GM tailor for the Chinese market. Even the Europeans are starting to tailor their vehicles for the Chinese market tastes" Correct they are tailoring for the Chinese market as well as other markets across the Globe. Problem is China's 140 local brands in the long term are going nowhere. They are providing a service for the Communist Party in providing cheap accessible products for people who want an Automobile in China. Foreign Brands are for the aspirants, not locally produced ones. Foreign manufacturers are making cheaper vehicles for the Chinese Market to capitalize on this desire.

  • Th009 Th009 on May 02, 2014

    A slump generally means a period of reduced economic activity. In this case, Chinese economy (and auto sales) is still growing at over 7%, a huge number in any major market. What's happening is that the growth is easing, or moderating ... or being damped. The market is still growing, though. And the major cities (with restrictions) are now only a small part of the total market.