BEIJING -- After frantic expansion during the first six months of the year, China's sales growth slowed in July to single digits.
General Motors' China sales for the month declined compared with July 2005. Meanwhile, Volkswagen AG's sales surged.
From January through July, sales in China jumped 40.3 percent compared with the same period of 2005.
Analysts blamed a return of price wars for the slower growth in July.
"Customers postpone their purchasing decision because of price cutting," says Sun Jian, a vice president with A.T. Kearney in Shanghai. "They don't know when is the right time to enter the market."
Sales in July rose by only 8.5 percent, to 288,183 units, compared with July 2005, according to Automotive Resources Asia, a Shanghai consulting firm. By comparison, sales in June grew by 14.7 percent from June 2005.
Despite the slower growth, China remains one of the world's fastest-growing car markets.
Says Sun: "Overall, this year will be a good year. I expect double-digit growth, between 20 and 30 percent."
Sales of the previously hot Buick Excelle compact, the Buick Sail subcompact and the Buick Regal full-sized sedan all declined compared with July 2005. GM was also hurt by a dearth of offerings in the domestically produced luxury-car segment, which saw healthy growth in July.
Imports tend to be more expensive. The Cadillac CTS is sold only as an import. And the Buick Royaum, based on the GM Holden Statesman sedan, was built from an imported kit. GM just stopped domestic assembly of the Royaum as well.
Sales of Volkswagen's domestically produced Audi A6 sedan roared ahead by 32.6 percent in July compared with July 2005. Volkswagen makes a special long version of the A6 just for China to target the chauffeur-driven segment.
GM also may have been hurt by a Chinese perception that U.S. cars get poor fuel economy. Rising fuel costs have pushed Chinese consumers toward cars with smaller, more fuel-efficient engines, says Yale Zhang, a market forecaster at CSM Worldwide's Shanghai office.
Zhang predicts moderate, even flat, growth for the rest of 2006.
You may e-mail Alysha Webb at [email protected]