China Cars Sales Slow To A Walk, A Bad Dream In Detroit (GM)(F)

Car sales in China may not have gone negative year-over-year, but they are getting close. In July, sedan sales were only up 1.9%. If SUVs and light trucks are thrown in, the increase was 6.8%. So, less fuel-efficient vehicles are still leading the industry upward.

The problem with light trucks being at the cutting edge of sales increases is that China is slowly increasing the prices of gas and diesel to try to push down demand and to cut the subsidies it gives to its big oil companies to buy crude high and sell buy-products low. The practice costs the central government tens of billions of dollars a year.

With a recession slowing car sales in North American and Europe, Ford (F) and GM (GM) have had to rely on Latin American and the developing countries in Asia for growth. Revenue from those nations is becoming dominated by China which is now the second largest vehicle market in the world.

To some extent, the recovery of US car companies will be driven by plans to get to break-even in the US and import profits from regions where unit sales are still growing. That was supposed to be China.

Douglas A McIntyre