It’s not meltdown, its slowdown.

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From AutomotivePR.com:

The media has being going wild regarding the recent slow-down in China’s automotive sales, which have been decreasing in sales month after month for three months in a row, and with it likely becoming a fourth month by the end of August, and maybe even a fifth month at the end of September.

At the start of the year, Chinese automakers were buoyant at the end of an amazing 2009 that saw car sales eclipse American car sales in monthly sales and then yearly sales, various manufacturers threw out extravagant sales goals for 2010 but by the middle of the year Chinese manufacturers realized that they were a long way from their intended sales goals. BYD dropped their sales goal from 800,000 units to 600,000 making it a much easier goal to reach, PSA Peugeot dropped their own sales goal to 375,000 from 400,000, Chery Auto has reached 45% of its 2010 sales goal by the end of July, and JAC just 35%. Other auto makers such as SAIC, Greatwall and Haima are all far from reaching their end of year goals.

So why are sales down in 2010? Well it seems as if the major city centres such as Beijing, Shanghai, Guangzhou and Shenzhen are reaching maximum capacity when it comes to cars, those that wish to take to China’s dangerous roads already have, and those that aspire to take to the roads are priced out of the system. Whilst cars in China are cheap by Western standards (with various BYD and Chang’an models in the high £3000 price bracket), they are still seriously expensive once you factor in the base cost of the car, sales tax, registration plate fees and insurance, and then the running costs – gasoline, parking spots, maintenance, etc soon add up and exceed the buying power of the average Chinese consumer. A parking spot in a city centre apartment building is going to be in the £5,000 to £15,000 price bracket, and the cost of parking your car in a city centre parking spot generally starts at £1 an hour, if you can find one, of course.

Another major reason for the decline in sales is due to the weather. A mixture of scorching hot weather and devastating floods have plagued China this year, if the weather isn’t right then consumers will not come out to play. Another factor is the patriotic sense of Chinese consumers that you generally don’t see in the UK, when the country is in a time of hardship (i.e. flooding) then it seems to be considered extravagant to splash out on a big ticket purchase.

Sales will no doubt go hot in the cooler months of September and will reach a peak in December and January as Chinese buyers often like to purchase a new car in which to drive home in for the celebration of Chinese New Year in, and it shows to their parents that they are doing well in the big city. It seems as if the media has become used to sensationalist big number headlines, but these big numbers tend to taper off in the summer months and growing again in the winter months, the big numbers will come back again, we just have to be patient.