It’s unanimous: the honeymoon is over in China. After experiencing spectacular growth exceeding 20% in the past two years, the automobile sector is in the doldrums. Chinese car manufacturers are announcing job cuts.
According to reports published by JD Power, the increase in auto sales has slowed down to 6.7% this year, as opposed to 22% in 2007 and 26% in 2006. Auto manufacturers have announced a reduction in mass production.
PSA Peugeot Citroën, an affiliate of Dongfeng Motor in China, has decided not to renew the contracts of 1,000 temporary workers on their Wuhan site. Volkswagen, which counts on China for 15% of its worldwide auto sales, announced in September that it was closing 700 jobs, after reduced production in its Changchun factory.
Chinese media have reported that Ford (US), BMW (Germany) and Chery (China) have also reduced their staff, over the last few weeks. Ford Motor China only reported a 6% annual increase for personal cars for the first nine months of 2008. Volkswagen China fared better, with a 13.1% rise in the past 12 months .
A slowing economy, a rise in petrol prices
The fall of auto sales in China started to become evident in the summer of 2008. In July, they pulled back 4% from the figures reported during July of the previous year.
Auto manufacturers assumed it was temporary and linked to rising fuel prices, the impact of the many natural catastrophes that hit the nation in the beginning of 2008 (including earthquakes in Sichuan and flooding), or new guidelines to combat traffic in Beijing leading up to the 2008 summer Olympics. But the market never picked up.
The Shanghai stock market dropped 70% in just one year. Raw materials continue to be increasingly expensive but revenues have stagnated. Consumers remain unmotivated.
The Chinese auto sector, while still more robust than its counterpart in Europe and in the US, is expected to stagnate in 2009. China, which has 1.3 billion inhabitants, only has 168 million auto vehicles, of which only 40.18 million are private cars.