As the Chinese economy cools, there are signs that the car market is finally slowing down. According to Bloomberg, analysts at Credit Suisse and IHS Automotive believe the market will not match last year’s strong growth as inflation continues to nag at consumers.
Wholesale passenger car deliveries in June grew at the slowest pace for 15 months. “Some dealers and automakers may panic and offer the largest discounts they can,” said Yale Zhang, a Shanghai-based analyst at consultant IHS Automotive. “If prices of daily necessities keep soaring, people’s expectations of their future financial security will be undermined, reducing their desire to buy a car.”
Bloomberg has already found one dealer, Zhu Dongwei in Zhengzhou, who is giving a 14% discount, a refund of sales tax and a chance to win an iPod if they buy a 41,800 yuan ($6,170) Matiz compact car.
This doesn’t dim the long term prospects for the market, which is now estimated to reach 15 million cars this year and an astonishing 50 million in the next 20 years (that’s more than the current worldwide total car production).
The question I have, here in Shanghai, is where are they all going to fit? Traffic is already terrible in Beijing and Shanghai, and it seems most of these new vehicles are still destined for the East Coast, rather than inland.
In the first half of this year alone, the number of vehicles in Beijing rose by 345,000, which is more than the total number of vehicles in the whole of Shijiazhuang, the capital of Hebei province, and a major metropolis in its own right.
The new cars have slowed Beijing to almost constant gridlock. The average speed on the city’s road network is down to 22km/h in rush hour and has dropped almost 5% compared to last year.
The Chinese car miracle may continue, but it is going to be no fun driving them.