Industry experts are uncertain of the direction China’s auto market will take in 2015. Last year, the country’s sales of passenger cars grew only 9.9 percent year-on-year, a considerable decrease from the 16 percent growth the industry experienced in 2013. Though domestic brands are “bearing the brunt of the slowdown,” according to the Wall Street Journal, foreign automakers have been struggling as well. Here are a few industry trends you can expect to see in 2015:
Slower Growth. Government regulations on car ownership have been increasing in the more mature auto markets of China’s larger coastal cities, such as Shenzhen. Intended to reduce traffic, these restrictions have cut into automakers’ business considerably. The country’s overall economic growth has also been sluggish. But the government’s commitment to to “transform China into a consumption-led economy” and higher consumer income levels are expected to drive the annual growth rate back up to high single digits or low double digits later this year, even if the first months of 2015 are relatively stagnant.
Increased Regulations. Consumer demands and a maturing market are expected to give rise to a host of new regulations intended to help buyers and dealers over the next year. Chinese car dealers may experience more freedom to change the brands displayed in their showrooms as regulations that require dealers to obtain permission from car dealers to sell their brands are relaxed. The Chinese authorities are also expected to continue their investigations into major foreign car companies’ antimonopoly practices.
Going Green. Electric vehicles currently account for less than 1 percent of total passenger car sales in China. But the government set a goal to have half a million of such cars on the road by 2015, and automakers plan on putting out new and appealing electric and plug-in hybrid models. Furthermore, new-energy car owners already have access to government subsidies and can acquire new license plates easier in some cities.
Oversupply. Several major international automakers, like Ford Motor Co. and Volkswagen AG, have voiced concerned that oversupply could threat the Chinese auto market next year, citing “a lack of capacity for flat sales in some months of 2014” as the main culprit, and say that they cannot produce enough vehicles to satisfy consumer demand. New production facilities should assuage some of these concerns, but could pose new problems for Chinese and Japanese car brands.
Dealer Discontent. With a profusion of new car models on the market, Chinese car dealers will have to “persuade more consumers to part with their hard-earned cash,” an increasingly challenging prospect which is slated to become even harder in 2015. Last year, dealers for BMW AG complained that the German brand’s targets were “unrealistic,” and similar issues are arising among luxury and mass market brands alike.
image credit: john lloyd