Back to top

Analyst Blog

The sluggish economic growth in China is taking its toll on auto sales. According to the China Association of Automobile Manufacturers (CAAM), growth in total vehicle sales deteriorated to 9.8% in May from 13.4% in April. A total of 1.76 million vehicles were sold in the country during the month, leading to sales of 9 million vehicles for the first five months of the year, up 12.6% on a year-over-year basis.

CAAM also revealed that wholesale deliveries of cars, multipurpose and sport utility vehicles (SUVs) increased 9% to 1.4 million units in May, compared with 13% in April and 13.3% in March.

China’s economy seems to falter mainly with respect to exports. The economy grew at its slowest pace at 7.8% in 2012 considering the last 13 years and is on the verge of missing its growth target of 7.5%.

Exports in May dipped to its lowest level of 1% almost over a year as exports to China’s top two markets, U.S. and the European Union, continue to fall.

Among the U.S. automakers, General Motors’ (GM - Analyst Report) sales went up 9.4% to 252,942 vehicles in the month driven by strong demand for Buick cars. Ford Motor’s (F - Analyst Report) sales were impressive, soaring 45% to 70,540 units in May.

Japanese automakers continued to be the losers due to the political conflict between Beijing and Tokyo over disputed islands in the East China Sea. Sales of Japanese brands, including Toyota Motor Corp. (TM - Analyst Report) and Honda Motor Co. (HMC - Analyst Report), fell 11.5% year-over-year in the first five months of the year, according to Xinhua news agency. Among them, Toyota sales grew marginally by 0.4% (for the first time since January), Honda sales increased 4.6% and Nissan sales inched up 2%.

In 2009, China overtook the U.S. as the biggest auto market in the world by sales volumes when the Beijing government introduced a stimulus package, including tax incentives for small cars.

However, the incentives were scrapped in 2011 and the Beijing government imposed quotas on new car registrations in order to control the traffic congestions. As a result, sales growth in China was lower at 4.3% compared with the projection of 8% growth by CAAM as well as with the double-digit growth in 2009 and 2010.

CAAM expects sales between 10 million and 11 million units for the first half of the year. The association believes SUVs will remain the fastest- growing segment in the year while commercial vehicles will record a moderate gain in sales.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
QIHOO 360 T… QIHU 95.04 +4.95%
PILGRIMS PR… PPC 31.52 +3.72%
WILLIAMS(C)… CWEI 138.97 +3.55%
FLAMEL TECH… FLML 14.02 +3.16%
CALLON PETE… CPE 11.50 +3.14%