First Europe, now China: Before you know it, global automakers could be depending on the United States as the great growth hope of the worldwide auto market once again.
It appears that auto sales in China are slowing down this year even more than they were originally forecast to slow down. Factors include the disappearance of lucrative government-supplied incentives to the Chinese to buy automobiles, a slowing economy, and the same rising fuel prices that also are crimping consumers in America and everywhere else. In the luxury segment, especially, 'very robust' demand has become just 'robust' demand — and is catching up with supplies.
For the many auto brands that have been targeting China over the last several years as their most important growth market, this is creating some problems. Mercedes-Benz dealers in China, Bloomberg reports, are offering record markdowns of 25 percent on high-end models such as the S300 sedan. Some BMW and Audi models also are selling for 20 percent below sticker prices; waiting lists have vanished; and new perks are appearing on showroom floors ranging from free iPhones to Hermes bag coupons.
All told, Chinese-industry representatives have cut back their estimate of market growth for 2012 to only about 5 percent from earlier forecasts of 8 percent. Contrast that to the recent and projected trend in the United States, where auto sales increased by 10 percent last year, to about 12.8 million units, and are widely forecast to increase by at least another 10 percent this year.
In European trading today, shares in BMW, Daimler and Volkswagen each dropped, apparently on news of the Chinese slowdown. China is VW's biggest market while it's the third-largest for BMW and Mercedes.
At the same time, the Chinese government has grown more restrictive on investments by foreign-owned brands, including not only the Germans but also GM, Ford and Toyota. It is now less inclined to approve new plants for foreign automakers, especially those — such as Chrysler and Renault — that don't already make vehicles there.
One brand sees a new bright spot in China, however. Volvo — which just announced plans to build a joint-venture car plant in China — will be free to promote NBA sensation Jeremy Lin as its new spokesman both in China and the United States.