On Breakingviews - Auto pessimism could be over-revved in China, says KatrinaHamlin
Employees work on Baojun RS-5 cars at a final assembly plant operated by General Motors Co and its local joint-venture partners in Liuzhou, Guangxi Zhuang Autonomous Region, China, February 28, 2019. Picture taken February 28, 2019. REUTERS/Aly Song
The latest numbers seem to imply a gloomy summer. Profit warnings from local champion Geely and suppliers like Johnson Electric and Sensiron blame weakness in the world’s largest auto market for their woes. The country is likely to see vehicle sales drop again this year, undershooting earlier expectations for zero growth, according to the China Association of Automobile Manufacturers.
Yet there is a case for cautious optimism. Should regulators merely refrain from further drama, underlying demand could pick up despite the broader economic slowdown and a protracted trade war. The luxury segment, which was sheltered from the demise of tax incentives, has defied the downturn. Higher-end marques Audi and Mercedes-Benz reported record sales in the first quarter, while BMW claimed double-digit growth in China revenue.
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