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Global Auto Manufacturers Worrying Over Slow Demand in China

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Published on : Sep 03, 2015

Among the Chinese, cars are a key symbol of success. Last year, the upper and middle classes bought around 24 million vehicles that accounted for more than a quarter of global sales. For major automakers such as General Motors, Volkswagen, and Ford, the automotive market in China has been the most profitable. But not anymore. The present turmoil in the Chinese economy and share market has left its impact on every sector and automotive sector is no exception. 

Analysts have pointed out that for the global car manufacturers such as Mercedes, GM, and BMW, the recent developments in the Chinese economy will make significant impact on their profits. Last year, GM achieved 35% of its global sales in China that led to 44% of its overall profits generated from the country. GM’s Buick is particularly dependent on Chinese market where it registered a whopping sales of 919,582 units compared to 228,963 in the U.S. last year. However, since the first of this year Buick sales have dropped significantly. Other automotive brands have also witnessed plunging sales figures.

Even before the current crisis in the economy, automotive sales in China had slowed down, followed by a period of rapid growth. The world’s largest auto market is estimated to grow at an average rate of 5% annually over the next several years. Market analysts have stated that apart from the slowing economy that has impacted the demand from the automotive market, reasons such as growing traffic congestion, difficulty in obtaining expensive license plates, and growth of car services such as Uber have played an important role in restricting the growth of the market. Also, regulations by the government to curb pollution has restricted car owners from driving cars at least once a week or more.