Party's over? After China SUV boom, carmakers face falling prices, sales

Fri Nov 20, 2015 4:59am EST
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By Jake Spring

GUANGZHOU, China (Reuters) - Carmakers coming late to China's craze for sport-utility vehicles (SUVs) this year may find it tougher to make money from a party that's overcrowded and already winding down.

With Chinese growing wealthier and often restricted to one vehicle purchase in major cities, SUVs have been a rare bright spot for an auto market sapped by the country's slowest economic growth in decades. In the year through October, sales surged 46 percent year-on-year in a broader market that grew 1.5 percent.

Carmakers have chased the rainbow with some 32 new SUV models expected in China for 2015, according to Automotive Foresight, including some being showcased at the Guangzhou auto show that opened on Friday. But with competition already squeezing prices, and sales growth seen weaker next year as demand becomes saturated, cashing in on SUVs may prove elusive.

"The good old days will pass, when you could just launch any model and you could have pretty good sales," said Yale Zhang, head of Shanghai-based consultancy Automotive Foresight.

Carmakers are undeterred for now. At the Guangzhou show, Weiming Soh, Volkswagen AG (VOWG_p.DE: Quote) Vice President for Sales and Marketing, said the German auto maker will launch six new locally made models in China's SUV market in the next three to four years.

Even as firms like Ford Motor Co (F.N: Quote) and Chongqing Changan Automobile Co 000625.SS present new SUVs at Guangzhou - the Everest and the CS15 respectively - official data shows prices are falling.

Prices dropped 3.4 percent in the first nine months of this year, outpacing the 1.2 percent decline for passenger vehicles overall, according to the National Reform and Development Commission, China's top planning body.

Meanwhile sales growth is expected to slip to 11 percent next year, according to IHS Automotive.   Continued...

A woman walks past a residential site in Shanghai September 21, 2010.  REUTERS/Aly Song