The China Association of Automobile Manufacturers (CAAM) reported that the country’s auto industry sales slipped down by 5.19% to 3.61 million passenger cars in the first six months of 2008 from the same period a year ago, as reported by AFP. The association further revealed that the industry sales in June 2008 surged by an annual growth of 13% to 517,469 units, but this was the third month in a row when rising sales graph took reverse turn. Moreover, both sedan and multi-purpose vehicle (MPV) sales grew by 16.72% to 2.67 million and 4.09% to 111,400 units respectively. However, sports utility vehicles (SUVs) showed the impressive performance with 42% increase to 224,300 units during the first half of 2008.

According to the industry analysts, the decline in automobile sales is the result of soaring fuel prices. Moreover, the downfall in the Chinese stock market - which has dropped around 50% since the destructive earthquake hit southwest China – and other extreme climatic conditions which affected the supplies of auto parts in 2008 negatively, were also responsible for weak auto demand. Besides, the government’s macroeconomic control policies to contain inflation and tackling unemployment have had a damaging impact on automobile sales.

The industry analysts have forecasted that the current sales trend will continue in the future; vehicle demand will remain sluggish due to the sharp rise in fuel prices. Moreover, the economy of China is growing at a slow pace resulting in a fall in wages, which, combined with a rise in material prices, have affected the automobile industry drastically.

The current situation could change in future, provided automobile manufacturers launch new fuel-efficient models, or vehicles which run on alternative fuels, such as hybrids, to encourage the demand for automobiles.

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