Financial services may support sector as 'slow growth' becomes norm
The nation's vehicle industry achieved record output and sales in November, following a significant rebound a month earlier, an industry body said Thursday.
More than 2.54 million cars were produced and close to 2.51 million were sold in China last month, both new highs, according to data from the China Association of Automobile Manufacturers (CAAM).
The CAAM said the record highs were largely due to an increase in passenger cars, with output of passenger cars exceeding 2.23 million, an increase of 21.55 percent, and sales reaching nearly 2.2 million, up 23.47 percent, both on a year-on-year basis.
"China's auto industry is fueled by the passenger car sector, which is supported by sales of sport utility vehicles (SUVs) and smaller cars," Chen Shihua, a spokesman of the CAAM, told a press briefing in Beijing Thursday.
According to the CAAM, output and sales of SUVs and cars with engines of less than 1.6 liters continued rising sharply in November, with output for SUVs increasing 63.59 percent year-on-year and sales climbing 72.06 percent.
The CAAM said that government incentives for smaller cars helped fuel sales in November.
In an effort to boost sales, China cut the purchase tax by half to 5 percent for small cars, which represent more than 60 percent of China's car market, according to media reports.
However, the full-year sales performance was probably weak, due to an economic downturn and slower growth of demand, according to a report accounting firm Deloitte sent to the Global Times Thursday.
The Deloitte report said that the CAAM had significantly lowered its estimate of car sales in 2015.
Sales slowed "dramatically" earlier this year, from 7.6 percent growth in January to a decline of 2.3 percent in June.
Though sales rebounded sharply in October with a 13.34 year-on-year gain and improved significantly in November, Dong Yang, executive vice president of the CAAM, said at Thursday's press briefing that he estimated this year's sales growth at just 3 percent, which would be far below the CAAM's earlier forecast of 7 percent, the Deloitte report pointed out.
The report said "slow growth" would be the new normal for the vehicle sector, although expanding financial services could boost numbers.
Developing innovative, effective financial services will be an important tool for the auto industry to cope with business declines, according to the report.
It noted that although the vehicle-finance market was worth about 650 billion yuan ($101 billion) in 2014, it still has room to grow.
Such financing services will grow fast because there is growing demand among younger customers, who are a major market force, for services that only require low down payments and offer low interest rates, the report said.
It forecast the auto credit market would exceed 2 trillion yuan by 2020.
