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.
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.