The sale of cars in China is on a decline, and the end of the country’s booming automobile industry seems to be on the verge. China has been the world’s leading car producer, and the country’s rapidly slowing economy is now dragging the vehicle demand along (Kwok, 16). Analyst project that car sales growth is expected to bump along an average of just five percent annually in the next ten years as China’s weak economy takes its toll. Over the last couple of years, China’s economy has been on a double-digit growth and as a result, the car sales have been growing steadily. Thus, the country’s slow-growing economy is one of the major factors that is leading to the deceleration of what has been the world’s greatest market for automobiles (Chanda, 54). With the decreased demand, car supply by manufacturers has also reduced. The international and domestic car manufacturers are facing an increased cutthroat competition from the consumers whose car preferences have been more practical in the recent days reducing the sale of vehicles.
The campaigns against anti-corruption under President Jinping has further reduced the customers appeal for luxury car brands as the consumers believe that they are capable of meeting their transportation needs by renting or hiring cars only when in need. As well, the slowed country’s economic growth has led to an increase in the unemployment rate making it tough for citizens and other customers to be able to afford luxury goods such as vehicles. There is no any sign of momentum in the next couple of years for the country’s economy as competition is growing and the nation’s major profit machine is slowing rapidly (Sha, Huang, and Gabardi, 19). According to Young (2014, pg. 7), the country’s auto sales will be very fortunate to grow by at least five percent this year. The car sales overall profits this year will be much lower than last year, but a slower economic slowdown has reduced this speed. The market has been forecasted to grow at an average of five percent per annum between 2015 and 2020 unless there is an increase in the economic growth.
Car sales growth in China’s mainland continues to decelerate, with year-on-year growth sputtering to 1.1 percent last month. Large producers have generally fared better than the small companies, which could pave the way for a long-expected consolidation of the industry. Car sales growth has been in pronounced decline since the first quarter of the year. Month after month, sales growth has fallen from 76.8 percent in February to 59.1 percent in March and 38.2 percent in April. China’s global economic factors are to blame for this economic slowdown, as the nation’s economy has been significantly affected in particular by the sharp export demand fall that occurred for six consecutive straight months before a rebound was realized in December. Despite the economic slowdown, the vehicle sales are still expected to reach 24 million units by the year 2020 in comparison with the 19 million mark of 2015 (Zhang et al., 82). This will be a great challenge to attain with the rise of ride-sharing services such as Didi and the country’s local dominant transport player Uber that have introduced new options for the customers reducing the need of buying new vehicles that has adversely slowed down the car sales. As well, the country’s mobility services such as hailing and ride sharing have further made the situation worse by reducing the private vehicle sales considerably.
According to analysts, 25 million cars were sold in 2015 that marked a 4.7 percent rise in the car sales from the previous year. Despite the increased sales, there was a decline in the percentage increase as a 6.9 percentage rise had been reported in 2014. This was the lowest car sales growth increase ever reported since 2012. At the time, the sale rise was at 4.3 percent (Gabardi, Huang, and Sha, 6). The decline in the number of purchased vehicles was as a result of monetary and traditional fiscal policies that imposed car purchase restrictions in China’s big cities that pulled the vehicles sales down by up to nine percentage points. The other sales percentage drop points were as a result of the extraordinary stock market swing that the country had been facing. If the Chinese government makes changes, such as doing away with the purchase restrictions, then the market is expected to improve steadily to its original position. The adoption of the purchase restrictions in China’s major cities leads to an inflation of the car purchase prices making it difficult for ordinary citizens to buy the expensive commodity. However, some foreign automakers made some profit despite the sales decline. The General Motors company, a United States based organization sold a record 3.61 million cars that was a 5.3 percent rise from the previous year sales. The government needs to act soon and fast by doing away with its monetary and traditional fiscal policies that continue to have an adverse impact on the country’s economy in an effort of mitigating the slowdown pace (Cespedes, 25).
Conclusion
Over the years, China has been the world’s leading automobile producer but the nation’s rapidly slowing economy has dragged the car demand along. The nations slow growing market economy is the major factor that has led to the deceleration of what was the world’s largest car market. Other reasons for the decreased car sales include the anti-corruption campaigns under President Jinping as well as the monetary and traditional fiscal policies imposing vehicle purchase restrictions in the country big cities. These factors have reduced the customers appeal for luxury car brands pulling the vehicle sales down. The availability of alternative means of transport provided by the Uber and Didi companies has also reduced the car sales. It is important for the government to act soon and fast by doing away with its monetary and traditional fiscal policies that continue to have an adversely affect the country’s car sales and improve its economy.
Work citied
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