BEIJING -- Passenger car sales in China grew by 4 percent to 211,219 units in November compared to the same month in 2003, according to Automotive Resources Asia, a Shanghai-based consultancy. Sales for the first 11 months of 2004 rose by 17 percent to 2.17 million units.
Production in November remained flat compared to the same month in 2003. It rose 17 percent in January thru November compared to the first 11 months of 2003, according to Automotive Resources.
Automotive Resources Asia includes sport-utility and multi-purpose vehicles in its passenger car calculations.
The slight growth in November followed a 1 percent rise in sales in October according to Automotive Resources. But it is too soon to say China's passenger car market is reviving, says Michael Dunne, Automotive Resources Asia president.
"It's too early to call it a comeback. Sales are up over 200,000 units a month, which is an important psychological benchmark. But in the fourth quarter numbers tend to be higher because dealers try to move product," he says.
Automotive Resources expects sales to grow by 17 percent for all of 2004.
That is a far cry from 2003's 70 percent growth, but few automotive executives were willing to express dismay at the slowdown.
"Seventy percent growth for passenger cars is really not normal. It's coming back to natural," says Jinya Chen, president of Delphi China.
"I prefer to think this is a good thing, to make the Chinese automotive industry more rational rather than emotional."
That doesn't mean Delphi and other suppliers haven't suffered from the slowdown. Chen admitted that Delphi has "a lot of work to do" in adjusting its forecasting and manufacturing to deal with new market environment.
Watching inventory levels
For automakers, the slowdown has meant inventories built up faster than expected. General Motors even stopped production of its Buick Regal sedan for a month to help keep inventories at manageable levels.
"This year the upper medium segment is not growing," says Joseph Liu, executive director of vehicle sales, service and marketing for GM China.
"We have our own control base of supply. We don't want to cross that red line. We control though production and through wholesale."
The sales slowdown started in May. One cause: The central government began to discourage bank lending as part of a move to cool China's overheating economy.
Less than 30 percent of China's passenger cars are bought with loans, but the move also dampened consumer sentiment.
"The consumer expectation was shaken by government comments that they wanted to continue to cool the economy," says Ron Tyack, president of Changan Ford, Ford's joint venture with Changan Automobile Group.
Price wars also continued to have a negative impact on sales as consumers hesitated to buy, fearful that the price could drop again in a matter of weeks.
Some car manufacturers are now starting to guarantee a refund if the price of a model falls within a certain period of time after purchase.
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