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The annual sales of domestically produced cars are expected to reach approximately 2.3 million units this year, but the gap between production and sales remains significant compared to the 1.3657 million units sold during the same period last year. Domestic car sales have reached 1.63 million units so far, which can be considered as growth. However, the auto market's performance has been disappointing, with supply and demand failing to create the anticipated market fluctuations due to an oversupply of vehicles from numerous manufacturers. The balance of demand in the market reflects a stable yet weak situation, and this stability is seen as a driving force for future development. High expectations were placed on the recovery of both manufacturers and dealers, but the "Golden September" did not materialize.
According to data from the National Passenger Vehicle Information Association, passenger vehicle sales in September totaled 207,224 units. While there was an 11.63% increase compared to the previous month, the market showed signs of recovery, though it experienced its first year-on-year decline in the same period, dropping by 2.19%. Industry experts predict that the auto market will remain challenging until the end of 2005. One key factor behind the continued slump in September was the price cuts introduced by manufacturers, which led consumers to delay purchases in anticipation of further reductions.
Rao Da, Secretary-General of the Passenger Car Information Association, believes the market will see only a weak recovery in the coming months, which suggests that the outlook for the remainder of the year remains uncertain. He predicts that October’s sales will fall even further than September’s, keeping the market in a downturn. Statistics from the association also show that in the first nine months of the year, cumulative domestic car sales reached 1.63 million units, significantly below the 3.5 million units planned by manufacturers. Most analysts believe it is unlikely that the remaining 53% of sales targets will be met in the final quarter of the year.
With annual sales projected to grow by around 20%, the total is expected to reach 2.3-2.4 million units. This means at least one million or even 1.2 million units of excess capacity could be released this year. However, many manufacturers only realized this issue in July, prompting over 80% of them to lower their production and sales targets. As a result, most companies have acknowledged they may not meet their goals, with few announcing new plans publicly.
The pressure on manufacturers is intense: declining sales, falling prices, and rising raw material costs are all contributing to financial strain. Despite this, some state-owned automakers like SAIC, FAW, and Dongfeng still reported modest profit growth in the first half of the year, although profits dropped by 10% in January-July. Xu Heyi, chairman of Beijing Hyundai Motor Co., argues that the current market conditions are normal, suggesting that last year’s high growth was an anomaly. He believes competition is just beginning, and the industry must consolidate through mergers, acquisitions, and even bankruptcies.
Industry insiders view the current slump and price wars as a necessary phase for the maturing Chinese auto sector. Although price wars are often criticized as low-level competition, they are seen as a prelude to industrial restructuring. With overcapacity leading to aggressive pricing, the market is forcing weaker players out. For example, models like the Passat, Bluebird, and Sonata have seen sharp declines in sales, while newer models such as Excelle, Elantra, and Fit have gained traction.
As the market continues to adjust, the role of innovation, technology, and cost efficiency will become increasingly important. Companies unable to adapt may struggle to survive. The reshuffle in the Chinese auto market is expected to continue until the end of 2005, with large corporations not necessarily dominating in the future, and smaller players having the potential to rise. In this turbulent environment, the ability to respond quickly to market changes will determine success.