It wasn’t too long ago that the meteoric rise of the Chinese car market made it the darling of the automotive industry, but a perfect storm of unfavourable market conditions has left local carmakers punch drunk. According to Automotive News Europe, China’s economic growth slowed to 6.2% in the second quarter of this year – down from 6.8% in 2018 – and this has had a dramatic effect on the domestic market share.
With total light vehicle sales of Chinese brands in the first half falling 22% to under four million units, their market share has also dropped by 3.9%, dipping under the 40% mark. The economic downturn has hit low-income buyers the hardest – precisely the target market of domestic brands, which offer affordable vehicles costing between 50,000 and 100,000 yuan (RM30,000 to RM60,000).
In tough times, these buyers are more likely than affluent households to cut discretionary spending on big-ticket items such as cars, and the brands are feeling the pinch. Not the least of which is China’s biggest carmaker Geely, despite the fact that the company has expanded its product lineup in recent months.
Over the past year alone, the company introduced the Binrui sedan and Binyue SUV on the B-segment Modular Architecture (BMA); its first MPV, the Jiaji; and the Xingyue SUV built on the C-segment Modular Architecture (CMA) that is shared with the Volvo XC40. It also launched its Geometry new energy vehicle brand in April, together with its first product, the Geometry A electric sedan.
But none of these models have generated any meaningful volume, and the company’s sales fell by more than 20% for the fourth straight month in July, with the most recent figure of 91,375 units being 24% down. Domestic brands are also reeling from their investments in new energy vehicles, which they made to take advantage of incentives that the federal government has since scaled back.
Subsidies on electric and plug-in hybrid vehicles were slashed by more than 50% on June 25, instantly cutting demand for these vehicles. Sales of BYD’s EVs and PHEVs shrunk for the first time in July, by 12% compared to last year, while Jianghuai saw its EV sales plunge some 66% last month. The fact is, says the report, consumers have little interest in electrified vehicles once subsidies are taken away.
It’s not going to get any easier for Chinese brands, with economic growth expected to continue stagnating as long as the country’s trade war with United States continues to escalate, and the remaining subsidies for new energy vehicles set to be phased out by the end of the year.
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