The Geely Gleagle at the recent Beijing Motor Show.
Gaining momentum after a painfully slow start to 2012, Chinese car sales rose by 9.9% last month, according to the country’s automotive trade association.
The market was particularly strong for makers such as Honda, recovering from last year’s production cuts which were caused by Japan’s March 2011 earthquake and tsunami. But Ford Motor Co. also saw a sharp 28% surge, giving the maker its third consecutive record sales month.
“We are very pleased to serve our Chinese customers and are very grateful that the all-new Ford Focus—the first of 15 new vehicles we are bringing to China by 2015—has been chosen by so many,” said Dave Schoch, chairman and CEO of Ford China.
The industry has been watching closely to see if spring would bring a much-hoped-for turnaround after a dismal first quarter where sales briefly declined, year-over-year. That was an unheard-of phenomenon in a market that, over the last decade, has seen annual sales grow at astronomical levels, nearing triple-digits in some years, and “only” posting growth of 20% or more in weaker years.
General Motors is now selling more cars in China than in its home U.S. market, and other manufacturers are generating similar levels of demand. Chinese profits have become critical for many companies, especially those hoping to offset declining demand and earnings in troubled Europe – where GM, for example, now expects to lose as much as $2 billion in 2012.
But the June numbers narrowly missed the double-digit mark and are still short of what many had been hoping for. During the recent Beijing Motor Show, most makers said they were hoping to see demand grow by at least 12% in 2012.
“We’re still very bullish about the market,” Kevin Wale, head of GM’s Chinese operations, said after the Beijing show, but he acknowledged the likelihood that demand would slip well below the pace of recent years.
Complicating matters, manufacturers have had to engage in significant amounts of price cutting in recent months – even to maintain the current, tepid pace of growth.
“We think this is a very dangerous strategy,” Ole Hui and Jeremy Yeo, Hong Kong-based analysts at said a report by the Mizuho Financial Group.
Adding further complications, the mega-city of Guangzhou became the latest urban market to put limits on car buyers. Several others, including capital Beijing, have already restricted the number of new vehicles that can be sold by using such practices as lotteries to determine who will be allowed to register a new car during any particular month.
Makers have been hoping that rising demand in second, third and fourth-tier cities — especially those in the Chinese interior just beginning to experience the country’s economic boom – would help offset such restrictions.
At the Beijing show makers unveiled a number of new products aimed at those first-time buyers, as well as new brands specifically targeting those markets, such as Venucia, a joint venture of Nissan and Chinese partner Dongfeng.
Overall Chinese auto sales came in at 1.6 million last month. Passenger sales alone rose 15.8%, but the commercial market actually dropped 10.2%.
For the first six months of 2012, Chinese automakers sold 9.6 million vehicles. The passenger car side was up an even more modest 7.1%, while commercial sales were down 10.4%.