(Bloomberg) -- China's passenger-car sales to dealerships increased at the slowest pace since March 2009, as weaker consumer sentiment crimped demand.
Wholesale deliveries of cars, sport-utility vehicles and multipurpose vehicles increased 13.6 percent from a year earlier to 946,200 in July, compared with 19 percent growth in June, the China Association of Automobile Manufacturers said Monday. Sales in July 2009 surged 70.5 percent as government incentives stoked vehicle demand.
Stocks of unsold vehicles are building as inflation erodes disposable incomes in the world's biggest auto market, reducing consumers' appetite for buying new cars. Vehicle supply in China may still outweigh demand, said Marvin Zhu, a senior market analyst at JD Power & Associates in Shanghai.
“Inventories are still rising, and we hear from some dealers that the transaction volumes are lower than a month ago,” Zhu said. He expects deliveries to begin falling from year-earlier levels in the fourth quarter.
Even as overall consumer prices rise, larger stockpiles of unsold cars and pressure by wholesalers to meet sales targets may lead to a decline in China's vehicle prices in the second half of 2010, the country's planning ministry said last month.
China's car prices fell 1.18 percent in the first half of the year from a year earlier, the National Development and Reform Commission.
Inflation in the world's third-largest economy accelerated to 3.3 percent in July, the fastest pace in 21 months, according to economists' median estimates. Rising labor and resource costs and “relatively loose” global monetary conditions may put further pressure on prices, the nation's central bank said.
China's gross domestic product expansion eased to 10.3 percent in the second quarter from 11.9 percent in the preceding three months, the government said.
While car dealers are adding sales incentives to attract customers and the government is offering 3,000 yuan ($443) to promote purchases of fuel-efficient models, a wait-and-see attitude among consumers is limiting the impact, JD Power's Zhu said. “Everyone is offering more and more incentives, and the customers are waiting for more,” he said.
Last week, General Motors Co., the largest foreign auto maker in China, said its local sales increased 22 percent in July, down from 23 percent in June. SAIC Motor Corp., a partner of GM and the largest domestic carmaker, said its sales rose 24 percent to 278,947 vehicles, the lowest increase since the automaker started publicly releasing its numbers in October 2009.
BYD Co., the Chinese automaker backed by Warren Buffett, cut its annual sales target for 2010 to 600,000 vehicles from an earlier goal of 800,000, the company said last week.
Vehicle sales including buses and trucks gained 14.4 percent in July to 1.24 million, the association said in today's statement.