AFP - The global car industry gathers for its biggest annual event in China as analysts say the brakes are coming on in the world’s number one auto market, with the slowing economy dragging on vehicle demand.
China’s auto sales growth is projected to bump along at an average five percent annually over the next five years as a weaker economy takes its toll, consulting firm McKinsey said in a report ahead of the Beijing Auto Show, which opens on Monday. “After years of double-digit growth, China’s auto market is slowing down. A cooling economy is one of the primary factors in the deceleration of what remains the world’s largest market for automobiles,” McKinsey said.
Domestic and international carmakers face increasingly cutthroat competition for consumers whose preferences have become “more practical”, it said. The anti-corruption campaign under President Xi Jinping has reduced the appeal of luxury cars, it added, and “significant numbers” believe they can meet their transport needs by leasing, co-owning, or renting vehicles. “There’s no sign of momentum,” said Michael Dunne,
CEO and strategist at Dunne Automotive in Hong Kong. Competition is growing and “the China profit machine is slowing”, he said “Chinese auto sales will be fortunate to grow by five percent this year. It isn’t that no one’s making profits, but the overall profits per car will be lower in 2016 than they were in 2015.” Passenger vehicle sales in China surged by an average of more than 12 percent annually from 2010 to 2015, but an economic slowdown has reduced the speed, with expansion dropping to 4.7 percent last year. The market is forecast to grow an average five percent a year from 2015 to 2020, according to the McKinsey report.