National Day no holiday for car industry in China

The US government's zillion dollar rescue package is not going to benefit the automobile industry directly. The North American market remained heartbroken when sales figures for September were released on October 2. Sales volume of all auto companies in the world's largest automobile market slumped by 26.6% on average, a record high drop in the past 50 years. 

September sales for Ford, Toyota, and Honda slumped by 35%, 32%, and 24%, respectively, while Chrysler's dropped by 33%. By promoting its products with favorable prices, General Motor successfully limited its sales drop to a mere 16%. Other automakers like Hyundai, BMW, and Volkswagen all saw sales volumes drop by over 10%. The Wall Street mess has neglected nary an auto giant.

"The financial crisis has put the automobile industry into danger. In fact we can't be immunized," admitted the president of Daimler at the Paris Auto Show.

Daimler is not the only victim. The Chinese market, still growing rapidly in April this year, isn't thriving either, which its performance over the National Day holiday amply demonstrated.

In August this year, the Chinese market saw its first year-on-year auto sales drop since 2006. Large stocks and high sales goals have imposed heavy pressures on auto dealers. To accomplish this year's goals, the National Day holiday was their last hope.

Auto dealers in Beijing reduced car prices by up to 10,000 yuan per unit. One week before the holiday, at least six new car models were launched.

Alas…

While car sales in Beijing increased by about 100% over the holiday, in other cities such as Shanghai and Guangzhou, auto markets saw no significant increase. In some cities, car trading volume during the holiday was actually lower than before.

Jia Xinguang, an auto industry analyst, believes consumers have become more rational these days, and price reductions and other promotions are having less effect on them.

However, both car makers and investors are optimistic about long-term investment.

China is Toyota's forth biggest market worldwide. A Toyoto board member in charge of its business in China believes the current drop is only a rational fallback. Although Toyota overestimated 2008 growth, he still has confidence in the mid- and long-term potential of the Chinese market.

And Warren Buffett, the world's champion investor, is investing in the hybrid and electric car business of BYD, a Chinese automaker, showing his confidence in the industry.