China Car Sales--A Little Less Attractive To US Companies

China’s car sales increases slowed very sharply in June, up only 10% compared to the same month last year, according to the China Automotive Technology & Research Center. The news comes four days after the central government and HSBC said manufacturing in the world’s most populous nation had cooled off considerably in June. Goldman Sachs Group (NYSE: GS) cuts its projection for China GDP growth this year to 10.1% from 11.4%.

GM, VW, and several other large global car companies hope that growth in the auto and light truck business in the People’s Republic will offset slow growth in their home markets of the US and Europe. China vehicle sales reached 13 million last years and passed American sales which were about 10.5 million. Chinese car and truck sales have expanded at a rate of 25% this year–until June figures came out.It will be difficult for the turnaround in GM’s fortunes to continue if China’s car sales flatline. It could also wreck VW’s plans for an expansion that it hopes will allow it to catch GM and Toyota Motor (NYSE: TM) in total global car sales. And, other companies including Honda Motor (NYSE: HMC) and Ford Motor (NYSE: F), which have a smaller share on the mainland but have hoped the region would augment their troubles in the West, may find that China offers only a modest boost if it offers one at all. There are too many car companies fighting for sales in the Chinese market, and, it seems, not enough growth to accommodate all of them.

Douglas A. McIntyre