Automakers feel China heat as buyers burnt by stocks rout desert showrooms

Tue Aug 11, 2015 3:12am EDT
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By Jake Spring

BEIJING (Reuters) - The great Chinese stock slump that first whacked luxury car sales is spreading to mass-market brands as wannabe customers like Zhang Jiabin count the cost of soured investments.

The 37-year-old food company executive lost nearly $6,500 when shares tumbled in June and July, and can't now afford the new Volkswagen Tiguan sport-utility vehicle he had his eye on. "I can't draw money," Zhang said, "I'll wait until (the market) goes up."

Auto sales in China fell 7.1 percent in July from a year earlier as many more who lost out in a trillion-dollar share slump joined Zhang in delaying purchases. The monthly drop, the biggest in two and a half years, was the fourth in a row and marked China's longest streak of sales declines since at least the 2008 global financial crisis.

Sales for January to July grew only 0.4 percent, the slowest first seven months of the year since at least 2009, and global brands from Ford Motor Co (F.N: Quote) to Nissan Motor Co (7201.T: Quote) are bracing for a sustained period of dwindling demand and depressed prices. That will squeeze profit, create an inventory burden for dealers and ramp up already-fierce competition.

China-based managers and executives at major global automakers say that leaves companies now pushing staff hard to meet targets despite the bleak outlook. Gloom over China's economy was highlighted on Tuesday when it devalued the yuan after a run of poor economic data.

At Volkswagen AG (VOWG_p.DE: Quote), China's best-selling car brand, a regional manager at a sales subsidiary said the automaker is pressing for staff to continue to meet targeted sales numbers to protect its market share, forcing inventory on dealers that will bite into their profit.

"The dealers are the first to cry," the manager said, referring to tensions with the automaker.

A Volkswagen spokeswoman said financially healthy dealers are part of the company's strategy as "only satisfied dealers guarantee satisfied customers."   Continued...

A woman walks past Mercedes Benz cars displayed for sale outside a store in Beijing, China August 11, 2015. REUTERS/Jason Lee