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Chinese Car Sales Rebound – But Prices Plunge

Dealers faced with a glut of vehicles slash prices.

by on Jun.13, 2012

A Mercedes-Benz E300 on display at the recent Beijing Motor Show.

It’s the Chinese take on the old good-news/bad-news phenomenon: Chinese car sales rebounded sharply in May after a worrying slowdown earlier in the year.  But to help build momentum, dealers have been slashing prices which could translate into lost profits for market leaders like General Motors and Volkswagen.

The sharpest price cuts in several years raise fears that the Chinese car market is weakening – along with the rest of the economy – and could go into a slump if manufacturers decide to hold the line rather than accelerate the current pace of discounting.

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Chinese car sales surged 16% in May compared to year-earlier volume, a welcomed turnaround from the first quarter of 2012 when the market showed an unexpected and unfamiliar decline.  But even so, sales for the first five months of the year were up only a modest 1.7%.  Based on patterns throughout most of the past decade that might have been expected to be more like a 20, 30, even 40% gain.

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Car Sales Unexpectedly Sliding, China Opts for U.S.-Style Cash-for-Clunkers Program

Incentive program includes buses and trucks.

by on Jun.08, 2011

China has become the world's largest automotive market, cities like Shanghai choked with traffic.

With the nation’s automotive market showing some unexpected signs of weakness, nervous bureaucrats have rolled out an incentive effort loosely modeled upon America’s controversial Cash-for-Clunkers program.

After years of double-digit sales gains, what is now the world’s largest automotive market posted 14% decline in sales last month compared to April.  But whether that was a temporary aberration or signs of a longer-term slowdown remains to be seen.

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Either way, it is creating deep worries in a country where automotive demand has helped fuel a booming economy.  And industry leaders are fretting about the billions they are spending to expand capacity to match earlier sales expectations.

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