China signals it may let weak automakers merge as sales slow
Chinese regulators signaled they may refrain from introducing large-scale stimulus measures and instead encourage weaker automakers to merge or be acquired, as a slowdown in the industry exposes overcapacity.
Slowing vehicle sales will "severely undermine" the auto industry's profitability and make companies with operational difficulties targets for takeovers, Qu Guochun, a deputy director at the Ministry of Industry and Information Technology, said at a forum in Tianjin, China.
Lu Weisheng, a deputy director at the National Development and Reform Commission, cited "severe structural problems" within China's auto industry and encouraged local carmakers to step up expansion overseas.
The assessments by China's two main auto industry regulators followed the state-backed China Association of Automobile Manufacturers saying last week that it is lobbying the government to consider stimulus measures to revive demand.
Profitability concerns
Its proposals include halving the 10 percent purchase tax and raising caps on the number of new vehicles that can be bought.
"To build a strong auto nation, we need the government's help to boost demand," said Shi Jianhua, deputy secretary general of the auto association, at a briefing last week. "Vehicle demand has a close correlation with economic growth and infrastructure investment."
The association predicts sales will grow at the slowest pace in four years as the economy slows. Chinese also are putting off purchases as a summer stock market rout saps discretionary spending. Dealers have responded by extending unprecedented discounts to reduce inventories, raising concerns about profitability.
Changan Automobile Group and Dongfeng Motor Corp., two large state-owned carmakers, said at the forum on Saturday in Tianjin that regulators should allow the market to weed out weaker players and avoid distorting demand by introducing short-term incentives.
Warning on stimulus measures
"China's overall passenger-car sales are still expanding at about 10 percent in terms of registered new cars," Zhu Huarong, president of Changan Auto, told reporters on Saturday in Tianjin. "Automakers in Europe and the U.S. would laugh their jaws off if they hear the argument about introducing stimulus policies with such growth rates."
Dongfeng's deputy general manager, Liu Weidong, said one-off stimulus measures have not led to good results in the past.
"We had a lot of examples in history to live beyond one's means," said Liu. "Under current circumstances, government can step up support in areas such as promotion of new-energy vehicles and replacement of old vehicles. Those are very necessary."
Lu Weisheng, a deputy director at the National Development and Reform Commission, cited "severe structural problems" within China's auto industry and encouraged local carmakers to step up expansion overseas.
The assessments by China's two main auto industry regulators followed the state-backed China Association of Automobile Manufacturers saying last week that it is lobbying the government to consider stimulus measures to revive demand.
Profitability concerns
Its proposals include halving the 10 percent purchase tax and raising caps on the number of new vehicles that can be bought.
"To build a strong auto nation, we need the government's help to boost demand," said Shi Jianhua, deputy secretary general of the auto association, at a briefing last week. "Vehicle demand has a close correlation with economic growth and infrastructure investment."
The association predicts sales will grow at the slowest pace in four years as the economy slows. Chinese also are putting off purchases as a summer stock market rout saps discretionary spending. Dealers have responded by extending unprecedented discounts to reduce inventories, raising concerns about profitability.
Changan Automobile Group and Dongfeng Motor Corp., two large state-owned carmakers, said at the forum on Saturday in Tianjin that regulators should allow the market to weed out weaker players and avoid distorting demand by introducing short-term incentives.
Warning on stimulus measures
"China's overall passenger-car sales are still expanding at about 10 percent in terms of registered new cars," Zhu Huarong, president of Changan Auto, told reporters on Saturday in Tianjin. "Automakers in Europe and the U.S. would laugh their jaws off if they hear the argument about introducing stimulus policies with such growth rates."
Dongfeng's deputy general manager, Liu Weidong, said one-off stimulus measures have not led to good results in the past.
"We had a lot of examples in history to live beyond one's means," said Liu. "Under current circumstances, government can step up support in areas such as promotion of new-energy vehicles and replacement of old vehicles. Those are very necessary."
