Sep 13, 2013
Car sales rose 11% in China last month, the fastest gain in four months, on strong demand from small, less-affluent cities with untapped markets.
Auto makers in August sold 1.35 million passenger vehicles, including sedans, sport-utility vehicles and minivans, up from 1.22 million a year earlier, the semiofficial China Association of Automobile Manufacturers said Tuesday. Sales rose 10.5% in July and 9.3% in June.
The gains came as China’s economy has shown signs of picking up. Industrial production hit a 17-month high last month.
"After two years of slow growth, car makers are picking up the pace by launching new models to cater to Chinese customers," said Sa Boni, an analyst at market-research company IHS. Auto makers introduced 25 new models in January through July, up from 18 models from a year earlier, according to IHS,
Demand in China’s small, Tier 3 and Tier 4 cities is growing fast, thanks to rising incomes and low car-ownership rates. In larger Tier 1 cities, such as Beijing and Shanghai, demand for replacement cars was solid, Mr. Sa said.
A Nielsen survey this month showed that 70% of China’s potential car buyers in the next 12 months will come from Tier 3 and Tier 4 cities, such as Datong in northern Shanxi province and Sanya in southern Hainan province.
Foreign car makers, including Volkswagen AG, General Motors Co. and Ford Motor Co., are expanding into interior Chinese cities as fast as they can.
Although foreign car makers have come under scrutiny over pricing, car prices haven’t declined. The average discount offered by dealers fell 296 yuan ($48) a car last month from a month earlier, according to data provider Wind Information Co. Chinese authorities in recent weeks have announced investigations into pricing by foreign companies in several industries, including pharmaceuticals, infant formula and automobiles. The official Xinhua news agency in July wrote that foreign makers of luxury cars have made substantial profits in China by raising prices.
"We haven’t seen big declines in car prices because of these reports," Mr. Sa said. In some cases, consumers are paying a premium for popular models, such as Volkswagen’s Tiguan and Ford’s Kuga SUVs, he said.
Among foreign car makers, German companies took first place, with 21.7% of China’s passenger-vehicle market, according automobile association. Japanese companies were No. 2, with their share falling to 15.2% in August from 17.6% in July. The market share for Chinese manufacturers rose to 38.01% from 35.19%, a five-year low.
"Chinese brands still enjoy an advantage edge over international brands by offering lower cost for more benefits, but the situation becomes tougher nowadays when many international brands are trying to price down for a bigger slice of market share," said Yan Xuan, president of Nielsen Greater China.
Including commercial vehicles, 1.65 million units were sold last month, up 10% from a year earlier. July and August typically are slow months for car sales.
Source: THE WALL STREET JOURNAL