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U.S. Auto Market Looks Bleak As China Sales Decline

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On: Fri, Sep 10, 2010 at 1:51PM | By: Sherry Christiansen

U.S. Auto Market Looks Bleak As China Sales Decline

In August U.S. auto sales posted their lowest profits in 28 years domestically while in China, passenger car sales declined to the lowest numbers since March of 2009. According to a recent Bloomberg news report auto sales are wavering because ”governments withdrew stimulus measures that propped up sales in the U.S., China, Europe and Japan.”

Bloomberg also reports: “The bleaker prognosis for sales may also hurt profitability for automakers including Toyota Motor Corp., General Motors Co. and Volkswagen AG.”  Automakers have had their backs against the wall and have had to offer more incentives in order to boost sales.

“The U.S. economy is looking downward, with high unemployment, mounting bankruptcies and other indicators that don’t paint a pretty picture,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc. in Tokyo. “In China, the government is putting on the brakes so that the overall economy won’t overheat.”

Toyota began offering incentives on the Prius (the best-selling hybrid vehicle in the U.S. and Japan), even before the government incentives of up to $3,000 and those special offers ended on September 8th.

Many auto dealers throughout the world are saying that auto sales are becoming much more challenging now that incentives are drying up.
One dealer in Wilmington,Delaware, Frank Ursomarso, who sells GM, Honda, and BMW vehicles, is offering to “exchange” lower monthly payment cars for customers higher priced vehicles. “That’s hitting a chord with people,” Ursomarso said. “That confirms for me that there is a compression of confidence. People are concerned they may lose their job or that they’re in too much car.”

In China, automotive sales have declined after the government raised taxes on small cars beginning in January of 2010. According to the China Association of Automobile Manufacturers in a statement on September 9th, auto sales growth in China has been reported at only 18.7% in August compared to 90% in 2009.

According to managing director at Intelligence Automotive, “GM, the biggest overseas automaker in China, its unit growth was 19.2 percent in August, the worst rate in at least 17 months. China has been incredibly strong the last 18 months, and I expect a lot of moderation in the latter part of the year,”

Volkswagen dealer Wang Ya Fei, in Shanghai, is offering a 3,000 yuan ($440) discount as well as free car insurance for its Bora and Sagitar models as China’s auto industry growth declines. “We don’t have a fixed date to end our promotions,” said Wang. “We will continue to offer them as long as the market offers promotions.”

The good news for the auto industry is that the markets in India and Russia appear to be holding their own even as many other markets’ growth slows drastically. Toyota, Volkswagen, and Ford are exporting more models to Russia as sales are projected to increase by as much as 13% in 2010 to 1.7 million units.

Like Russia, India’s demand for cars has grown beyond expectation. According to Suzuki Motor Corp. Chairman Osamu Suzuki, Toyota buyers have to wait as long as 3-6 months for a new vehicle. Indian passenger car sales rose 33% from last year, and annual sales are projected to reach 3 million by the year 2015.

According to J.D. Powers and Associates spokesperson: “We are seeing a change in the tide of what’s driving global auto sales.” Powers also commented, “The emerging markets are paving the way to the future because that’s where most of the growth is.”


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