Volkswagen and GM suffer in China
Wednesday, November 3, 2004 Posted: 1108 GMT (1908 HKT)
SHANGHAI, China (Reuters) -- General Motors and Volkswagen said on Wednesday their vehicle sales in China fell between 6.5 and 28 percent last month, underscoring slowing demand in the world's fourth-largest vehicle market.
Executives at both car makers -- the leaders in the world's fastest-growing car market in 2003 -- held off from predicting when demand would pick up. But senior industry executives have said the market would rebound only next year.
GM spokeswoman Daphne Zheng warned that some manufacturers may have been pushing cars to dealers despite slowing demand, in a bid to hit internal sales targets.
"Third-party data suggests that vehicle inventory in China has risen to an alarming level," she said, adding GM had not been pressuring dealers. "This is having a short-term impact on our wholesale volume."
Growth in China's car market began slowing in the second quarter as Beijing applied the brakes to overheating sectors of the economy, squeezing car makers' margins as they cut prices to try and shift cars.
"If government economic tightening measures ease off next year, we should see a return to more healthy growth," said Hu Zhiwei, an executive for Shanghai Volkswagen, the German automaker's main plant in China.
Last week, GM'S chief executive, Rick Wagoner, said he expected the Chinese car market to recover by mid-2005.
Sales slow
Volkswagen's two ventures, in Shanghai and the northeastern industrial city of Changchun, saw combined sales slip 11.5 percent to 47,521 units in October from the previous month -- reversing September's 8.4 percent month-on-month gain.
The venture between Volkswagen and Shanghai Automotive Industry Corporation sold 21,766 cars in October, down 28 percent on September. But its venture in Changchun, a tie-up with First Automotive Works, saw October sales climb 9.7 percent from September to 25,755 cars, helped by price cuts.
GM, the world's top automaker, said it sold 6.5 percent fewer vehicles in October than in September, with 34,476 vehicles rolling out of the country's showrooms. Sales at its flagship Shanghai GM venture fell 14.4 percent to 14,350 cars.
GM added that sales in the first 10 months of this year rose 32.4 percent to 404,222 vehicles, more than in all of last year. Sales at Shanghai GM rose 34.6 percent to 212,076 cars.
Apart from slowing sales, a price war is eroding margins. GM offered 11 percent discounts in May before Volkswagen countered by hacking prices by up to 11.7 percent in June.
GM, Volkswagen, Ford Motor Company, Toyota Motor Corporation and others are spending more than $13 billion to triple capacity to some 6 million sedans annually by 2010, prompting fears of a margin-sapping glut down the road.
Industry watchers expect car sales to rise 10-20 percent this year after doubling last year to about 2 million sedans.
Volkswagen claims around a quarter of China's market, GM just under a tenth.
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