Car sales weak but luxury sector remains optimistic

Passenger sales have slowed as consumer confidence in China’s economy wanes.

Wholesale deliveries of cars, multipurpose and sport utility vehicles increased 9% to 1.4m units in May, compared with 13% in April and 13.3% in March, according to the China Association of Automobile Manufacturers.

Slowing auto sales indicate lower consumer confidence as recent trade, inflation and lending data in May trailed government estimates. Industrial production rose by 9.2% year-on-year - less than had been forecast - while factory-gate prices fell for the 15^th month in a row.

Although momentum in the overall passenger vehicle segment is slowing, the luxury vehicles sector remain optimistic. China Yongda Auto Services, a distributor of luxury vehicles, has recently signed a contract with Volkswagen, which they predict will boost sales of Audi-brand cars by 140-fold in 5-6 years.

Yongda’s April and May sales volumes rose at least 10% from a year earlier, although the company posted a 6.9% fall in net income as a result of increased selling and distribution expenses. Nonetheless, the bullish company is planning to add another 34 dealerships this year.

McLaren Automotive Ltd is also hoping to muscle in on the Chinese market, and is forecasting sales in Asia will more than double this year. The UK-based company, which manufactures the $1m P1 supercar, plans to sell 1,400 units worldwide in 2013.