Years of record sales may be over for China carmakers

This article is more than 12 months old

SHANGHAI Global carmakers converge on China for the Shanghai auto show this week, with the industry bracing itself for a sharp sales slowdown and potential price war as competition stiffens in the world's biggest car market.

Manufacturers have reaped a windfall as the fast-expanding Chinese middle class hits the road, but clouds loom as Volkswagen, Toyota, GM, and others pitch their latest models at China's biggest auto showcase starting this Wednesday.

Passenger-vehicle sales have nearly quintupled over the past decade and logged another stellar performance last year, surging 14.9 per cent to a record 24.38 million, according to the China Association of Automobile Manufacturers.

But as China's decades-long economic boom loses lift, sales growth will essentially be flat this year and could even shrink next year, consultancy IHS Markit said last week.

IHS Markit said there is already "a major price war descending on the market" as manufacturers and dealers slash prices.

Still, last year's sales set a 26th straight annual high-water mark, beating the record 17.55 million cars sold in the United States, which China zoomed past eight years ago.

But sales were boosted by the government's halving of a 10 per cent purchase tax on small-engine cars in late 2015. That tax has been raised to 7.5 per cent this year and will be restored to 10 per cent in 2018, dampening sales.

China now has a crowded field of mostly domestic carmakers, many of which won't survive, said Mr Johan Karlberg, a Shanghai-based partner with global consultancy Roland Berger. - AFP