Shanghai in slow lane as market crash accelerates car sales slump

A number of international car manufacturers such as Peugeot, Citroen and Ford have warned of sluggish sales in China. Photo / AP

Business appears to be slow at the Mercedes-Benz showroom in the Jing'an district of Shanghai.

There are no customers and the staff look bored. A family comes in to look at the cars but appears to have no intention of buying. A salesperson is tight-lipped when asked whether they are seeing fewer customers through the doors.

Car sales in China are slowing after years of rapid growth, and have slumped in the past few weeks. According to the China Association of Automobile Manufacturers, numbers sold in June fell 5.3 per cent from May; this drop coincided with the stockmarket crash that saw the Shanghai Composite Index lose 14 per cent in July. The association previously estimated that sales would grow 7 per cent this year, now it thinks that figure will be only 3 per cent.

A number of international car manufacturers such as Peugeot, Citroen and Ford have warned of sluggish sales in China, while Audi lowered its global sales forecast last week because of falling demand there. State media reports that some companies have been cutting prices since April in an effort to boost sales.

Bill Russo, managing director of management consultancy Gao Feng Advisory Company, confirms that the sector is slowing down. The recent stockmarket crash is "noise in the system", he says, but admits that "there could be a short-term impact".

Nonetheless, he believes the industry should be optimistic about China.

"The expansion of the market will be guided by the number of people who have enough money to buy a car, and that number will grow."

The economic slowdown is also having an impact on the luxury goods market and there are concerns that the share crash will make it worse.

"The luxury market has been in slowdown mode since 2012, the start of the anti-corruption campaign," says Liz Flora, editor-in-chief of Jing Daily, a website covering the luxury industry in China.

At the Gucci store at the IAPM shopping centre on Huaihai Rd in Shanghai on Friday, there were no customers. It is the largest Gucci store in China.

In the Prada store there were a few customers looking at bags but they were outnumbered by staff by two to one. In contrast, the shopping centre itself was buzzing, with many people strolling around, and the food court was doing brisk business.

Wang Cheng was heading to the Nike store and said he didn't think most people were there to shop. "Most are here for the air conditioning," he laughed. Temperatures this summer have hit almost 40C.

The numbers

5.3 per cent fall in car sales in June from May.

3 per cent rise in sales forecast for this year.

14 per cent fall in Shanghai Composite Index in July.

- Observer