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China, India car markets slow in April

Unsustainable: The downturn in the Chinese car market in April can be partially attributed to government measures designed to curb unfettered growth in vehicle volumes.

Chinese car market shrinks for first time since January 2009, as Indian growth slows

General News logo11 May 2011

CHINESE car sales have fallen for the first time in 28 months, while India’s motor industry reported its slowest monthly growth in two years.

China Association of Automobile Manufacturers (CAAM) data shows 1.55 million cars were sold in China last month, 0.25 per cent down year-on-year and 15 per cent lower than March.

A contributing factor – other than that China’s once-rampant economic growth has been slowing since the middle of last year – is that its government is introducing measures to curb the unfettered growth in vehicle volumes to a more sustainable level to ease pressure on parking, road congestion and air pollution.

As GoAuto has reported, China axed small-car sales subsidies and rural stimulus incentives on January 1, effectively imposing a 10 per cent purchase tax on small passenger cars.

High population areas, such as the Beijing autonomous region, have also restricted vehicle registrations.

80 center imageLeft: Traffic in India.

In neighbouring India, the Society of Indian Automobile Manufacturers (SIAM) reported 162,825 passenger car sales in April, up 13.18 per cent. Last April, the Indian car market grew 24 per cent.

In addition to fears that India’s economic growth is slowing – and the impact that has on consumer confidence – the Indian government is taking action to curb inflation, currently at nine per cent, and has increased interest rates several times in the past year, prompting lenders to increase the cost of car loans, encouraging customers to postpone their purchases.

Since 2005 India’s annual car and commercial vehicle market has increased from 1,061,572 units to 2,520,421 units – an increase of 137.4 per cent. India’s car market growth of 29.2 per cent last year lagged slightly behind China’s 32 per cent figure.

SIAM predicts the Indian car market to grow between 14 and 16 per cent this year, against China’s projected 10 to 15 per cent growth – although year-to-date, the Chinese market has experienced less than six per cent growth.

In 2009, the Chinese car market overtook the United States as the world’s largest, and CAAM is predicting that this year it will breach the 20 million mark.

While the downturn in the appetite for cars in the neighbouring population giants of China and India could pose a worry for the European, North American, Japanese and South Korean brands that are investing heavily to penetrate those markets, they and other emerging markets such as Latin America and Russia continue to offer opportunities as they outperform the established brands’ stagnant home markets.

Conversely, Chinese and Indian vehicle factories are already hatching their plan B by offering low-cost vehicles to Western markets such as Australia.

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