China's car sales forecast to slow

Yonhap (Hong Kong) - China's car sales growth will likely slow as the country's tighter monetary conditions could dampen demand for new cars, Barclays Capital said Thursday.

According to the British bank, China's monetary tightening will have a more negative impact on the country's automobile market, along with that of India, compared to other Asian economies.

"We would expect weakness in auto sales to be most pronounced in China and India, where monetary conditions are significantly tighter than elsewhere in the region," Barclays' Peter Redward said.

The analyst said tightening liquidity of the banking sector will drive up borrowing costs and reduce credit availability, which will push down automobile demand.

Redward forecast demand for automobiles would see even sharper declines if oil prices remain high for a sustained period, with the impact increasing materially after two to three months.
"The first signs of weakness in auto sales data may appear in April, if oil prices remain high throughout March," he said.

According to the China Association of Automobile Manufacturers, China's total vehicle sales, including buses and trucks, fell 33 percent in February from the month before to 1.27 million vehicles. Sales of passenger cars dropped 37 percent to 967,200 vehicles.

Market analysts expect that the country's automobile sales will see slower growth throughout this year due to surging oil prices combined with the end of government subsidies.