China's new-car market continues to cool

(August 9, 2010) China's passenger-car sales to dealerships increased at the slowest pace since March 2009, as weaker consumer sentiment crimped demand, Bloomberg News reported today.

Wholesale deliveries of cars, sport-utility vehicles and multipurpose vehicles increased 13.6 percent from a year earlier to 946,200 in July, compared with 19 percent growth in June, the China Association of Automobile Manufacturers said Monday. Sales in July 2009 surged 70.5 percent as government incentives stoked vehicle demand.

Stocks of unsold vehicles are building as inflation erodes disposable incomes in the world's biggest auto market, reducing consumers' appetite for buying new cars. Vehicle supply in China may still outweigh demand, said Marvin Zhu, a senior market analyst at JD Power & Associates in Shanghai.

“Inventories are still rising, and we hear from some dealers that the transaction volumes are lower than a month ago,” Zhu said. He expects deliveries to begin falling from year-earlier levels in the fourth quarter.

Even as overall consumer prices rise, larger stockpiles of unsold cars and pressure by wholesalers to meet sales targets may lead to a decline in China's vehicle prices in the second half of 2010, the country's planning ministry said last month.

China's car prices fell 1.18 percent in the first half of the year from a year earlier, the National Development and Reform Commission.