FRANKFURT: Volkswagen AG, Nissan Motor Co. and Guangzhou Automobile Group Co are among the carmakers increasingly counting on Chinese government tax cuts to stimulate demand and help the world’s biggest auto market rebound from its worst slump in a generation. The unanswered question is when that will happen.
Auto executives attending this year’s show in Shanghai gave a range of estimates from this month to the second half of this year. As a point of reference, the state-backed China Association of Automobile Manufacturers said last week that sales could rebound in July or August after the effects of government tax breaks trickle down to consumer spending -- but overall growth likely would be flat this year.
The tax reductions could be big. China announced plans to cut a total of two trillion yuan (US$298bil) in duties and fees, including value-added taxes, this year to help bolster the world’s second largest economy.
Still, not everyone is convinced that the stimulus will be enough to keep all carmakers competitive.
“I’m not optimistic about the overly fragmented and capital-intensive industry business model,” said Bill Russo, chief executive officer of Shanghai-based consultancy Automobility Ltd. “The headwinds are still there.”
While automakers showed off some exciting new models at the Shanghai show, consumers likely will remain cautious until there is some resolution to the US-China trade negotiations and clarity on the direction of the overall economy, said Steve Man, a Hong Kong-based analyst with Bloomberg Intelligence.
Yesterday, China said gross domestic product rose 6.4% in the first quarter from a year earlier, exceeding economist estimates. Bloomberg
Global sales chief Juergen Stackmann said the carmaker saw demand in China pick up in April, though full-year sales may be little changed from 2018. It’s inevitable that China’s growth will moderate, but the company expects the market to continue growing in coming years, Stackmann said.
A day earlier, chief executive officer Herbert Diess said he’s more optimistic about the second half of the year. The world’s biggest carmaker was “pleased” it boosted its share in China by about 1 %.
> BMW AG
Chief financial officer Nicolas Peter forecast China sales to increase between 5% and 10% this year, but he said the overall auto market likely will be flat.
> McLaren Automotive
CEO Michael Flewitt told Bloomberg Television that the maker of ultra-high-end sports cars expects sales to be flat this year at 300 units.
China’s overall car market continued to fall in the first quarter of 2019 but may recover in the second half with government help, said Makoto Uchida, president of Nissan’s Chinese joint venture. — Bloomberg