Limited room left for growth after boom years: analysts

Auto sales in China grew at a slower pace in November, according to data released Wednesday by an industry association, amid the country's economic slowdown and with more limited prospects for domestic auto sales after years of expansion.

Total vehicle sales hit 2.09 million units in November, up 2.3 percent from a year earlier, compared with 2.82 percent growth in October year-on-year, and 2.47 percent growth in September, according to the China Association of Automobile Manufacturers (CAAM).

Sales of passenger cars also saw slower growth. Passenger car sales in the first 11 months reached 17.64 million units, up 9.2 percent over the same period last year.

But that figure compares to 9.76 percent growth in the first 10 months year-on-year, according to the CAAM data.

Analysts said the slowdown was partly due to slower economic growth, and also the fact that there is now more limited room for the domestic auto market to expand.

"The room for growth in auto sales in China, even in third- and fourth-tier cities and counties, is limited after years of fast expansion," Mei Songlin, vice president and managing director at consultancy J.D. Power China, told the Global Times Wednesday.

"Traffic jams are very common in our small city now. There was very little traffic on the roads four to five years ago," Cao Xiao, a 26-year-old white collar worker in Hami, a small city in Northwest China's Xinjiang Uyghur Autonomous Region, told the Global Times Wednesday.

Given that the auto sales volume has already become large in lower-tier cities and counties, the new growth point for China's auto industry could be demand from drivers who plan to buy their second vehicles, Mei said.

"Higher-end autos from well-known brands will be popular among such drivers," Mei noted.

The economic slowdown is another key factor, according to Mei.

China's national consumer price index eased to 1.4 percent in November, hitting a five-year low, according to data released Wednesday by the National Bureau of Statistics.

Furthermore, there were rumors that auto purchasing limits would be launched in more first- and second-tier cities at the beginning of this year, which encouraged consumers "to rush and buy vehicles, and release their demand in advance," Zeng Zhiling, a senior analyst at LMC Automotive, told the Global Times Wednesday.

Dong Yang, secretary-general of the CAAM, was quoted by Reuters as saying in October that this year's auto sales growth may come in at around 7 percent, roughly half last year's 13.9 percent rise.

Mei warned that auto manufacturers' vehicle inventories are now very large, and he suggested that the companies should adjust their business strategies.

Meanwhile, the market share of China's homegrown passenger car brands rose to 40.90 percent in November, 1.36 percentage points higher than in October, and 0.31 percentage points higher than in the same period of 2013, data from the CAAM showed.

The total market share of German passenger car brands declined to 17.16 percent in November, 1.75 percentage points lower than in October, a drop that analysts said was partly due to negative recent news reports.

FAW-Volkswagen, the joint venture between German carmaker Volkswagen and its Chinese partner FAW Group, announced on October 17 a recall of 563,605 Sagitar cars and 17,485 imported Beetle sedans in China, to deal with concerns about the models' rear suspension.

Several groups of owners of FAW-Volkswagen Sagitar sedans in China launched protests at the end of October to express their discontent at the company's recall offer.

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