World’s largest automobile market in China collapses

VW China still confident

China has always been the largest automobile market in the world. Now it could shrink for the first time in decades and, according to Volkswagen, continue to decline for some time. “The market is a challenge. Since June, every month has turned out worse” says VW China Board Member Jochem Heizmann at the car show in the southern Chinese city of Guangzhou. Nevertheless, the carmaker wants to sell more vehicles to China.

The decline is already noticeable in the figures recorded for the year. According to Heizmann, no profits are predicted for the Chinese car market this year. In addition, a decline of one to two percent is even expected. The VW-China board of directors fears that growth will be poor in the coming years as well.

For several months now, the car market in China has been burdened by the weak economy and the trade dispute with the USA. In the first ten months of 2018, sales of all manufacturers fell by 0.1 percent to 22.97 million euros. According to the Chinese Automobile Association CAAM, the October figure was 11.7 percent lower than in the same period of the previous year. This is the largest decline in seven years.

Based on these figures, Volkswagen should give up on the targets they set for the Chinese car market this year. Heizmann nevertheless remains confident and estimates that VW will still be able to beat their competitors in China: “We are growing and expect growth next year as well.”

Is Beijing driving the economy forward?

In the first nine months of this year, Volkswagen delivered 3.04 million vehicles in China and Hong Kong, five percent more than in the previous year. According to observers, this increase will amount to two percent for the rest of the year. The core brand VW Passenger Cars is currently operating critically: sales fell by 10.5 percent in September and by 9.8 percent in October compared to the previous year.

According to reports, the Chinese government is even thinking about tax reductions for car buyers in order to bring the market forward again. “The government should decide as soon as possible” comments Heizmann. A clear “yes” or “no” is required otherwise consumers could decide to reserve the right to buy.

Despite everything, China remains VW’s most important foreign customer. Heizmann therefore continues to see great opportunities in the long term. The potential is greater than in any other relevant car market in the world, says the VW manager.