China Sets Record in Broadband Equipment Market

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The forecast for light vehicle sales in China is expected to decline 3 to 4 percent from previous estimates for 2015, according to new analysis and a forecast update from IHS Automotive, the leading global source of critical information and insight to the automotive industry and part of IHS Inc.

IHS Automotive has reduced its full year 2015 light vehicle sales forecast for China to 23.4 million units, reflecting a growth rate over 2014 of just 1.4 percent, compared with its previous forecast of 4.4 percent year-over-year growth. Recent sales data -- when combined with the slump in the Purchasing Manager’s Index and currency devaluation in early August, as well as the summer stock market rout -- suggests a significant rebound in light vehicle sales is unlikely in the coming months. However, sales activity may not be as negative as current media reports suggest.

The sales slowdown is widespread throughout China, according to the IHS analysis of its proprietary province- and city-level forecast, along with the current economic climate. Nearly one in four cities (out of 340 monitored by IHS) is reporting declining light vehicle sales.

IHS preliminary readings of car sales in China for the month of August suggest some stabilization and that the selling rate has improved during the month, although it is still likely to show a small year-over-year decline estimated to be less than 2 percent. If sales in August do follow these readings, once all figures are reported, this would mark the third consecutive month of declines in China. This has happened just once in the past 15 years -- in 2008, at the height of the global recession.

Retail vehicle registrations have maintained volumes far better than wholesale vehicle sales, which may provide stronger guidance for dealer orders. However, registration data also show that the selling pace for new customer deliveries has stalled since March of this year, according to the analysis.

IHS analysts are also looking ahead to 2016 and still expect some growth in light vehicle sales next year, though just about 3 percent, to 24.2 million units. This small improvement in sales is based on a series of technical factors being closely monitored by IHS analysts, including the benefits of lower car prices and lower interest rates. Other factors include the ramp up of forced replacement of older, polluting cars based on the government vehicle scrappage program aiming to scrap 14 million yellow label vehicles between 2014-2017; and less influence from new cities introducing license plate limits and from the light commercial vehicle sector (already down 10 percent this year). IHS also expects less of a correction in dealer inventories in 2016, which is exaggerating the current wholesale vehicle sales decline.

It is anticipated that several of these factors may influence light vehicle sales during the early months of 2016, which could prove the most difficult. Overall market development will depend on how long it takes consumers in China to adjust to the speed of the economic slowdown.



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