Falling Chinese car sales concern US producers

Signs of a worse-thanexpected slowdown in the Chinese car market come at a time when General Motors and other troubled carmakers are counting on growth in China to cushion the effect of problems in the US market.

Rick Wagoner, GM chairman and chief executive, told the Financial Times last month that he expected emerging markets to contribute 80 per cent of global car industry growth in the next five years, and he was particularly optimistic about China, GM's second-largest market.

Lehman Brothers said in a research report last week that passenger car sales in China fell 10 per cent year-on-year last month because the Beijing Olympics and weakening consumer confidence kept buyers out of car showrooms.

JD Power, the auto consultancy, said 80 per cent of Chinese auto dealers whom it surveyed said that sales had fallen in the three months to August over the previous quarter. This would be the first time sales have fallen on a monthly basis since 2005.

John Bonnell, chief China forecaster for JD Power, said it was too early to predict the magnitude of the August slowdown until official figures were released next week.

However, he added, "any kind of a contraction would be a surprise". It was still unclear whether a possible slowdown would be just the temporary effect of the Olympics.

"Is the whole thing slowing down, or are people only taking a pause to go to the Olympics?"

JD Power cut its forecast for 2008 sales growth to 10 per cent after several years of double-digit growth. But Mr Bonnell said there was a chance that 2008 would see little or no growth in Chinese auto sales.

Baosteel, the Chinese steelmaker, has cited weakness in the Chinese auto sector as one of the main factors behind a recent drop in steel demand. Baosteel said auto sales might recover in the fourth quarter, for seasonal reasons.

Lehman Brothers said it expected a "reasonable demand recovery in September and October", but it predicted that auto sales would remain "lacklustre for the rest of 2008 and possible early 2009".