Analysis China passenger car market in June

　　Besides those favorable factors analyzed last month, like Shanghai VW, some automakers’ production expansion and the adjustment to their production plans have stimulated the auto market in June, so that consumers no longer have to wait, when they would like to purchase some popular models. However, the auto market continues to cool off. As expected before, June’s wholesale passenger cars remained as same as May. Usually, the number of wholesale cars is higher than that of retail sales so that the whole-vehicle enterprises could gain more benefit. On the other, owning to the slow growth in national economy and consumer’s lack of confidence over the auto market, the number of retail sales is comparably low. 2010 World Cup, drawing the global attention, has led to fewer consumers in the auto market. Strikes posed by Toyota auto parts factories, along with continuous South China's flood disaster in June have both impacted on the automobile logistics, and caused low retail sales as well. According to someone, the market growth slows down due to the state’s ineffective policies. But here is the fact: thanks to the state’s stimulus, the auto growth could have reached 8 million units for 2 years.

　　Outlook for July passenger car market

　　The increase in June’s inventories has decreased July’s wholesale cars, which also creates a good opportunity for workers to enjoy time off due to high temperature and maintain their equipment. As the passenger car market will hit the bottom in July, as well as the auto market continues to return to the normal growth, the negative growth in July’s auto market month on month will be an inevitable trend. Compared with June, there is one more day in July in accordance with working hours or the calendar. Thus, it may raise the sales slightly, and decelerate the negative month-on-month growth. Moreover, two policies will begin to exert their power in July, such as the time-extended vehicle trade-in policy, and subsidies of 3000 Yuan for energy-saving vehicles. The loss in sales and production, caused by Toyota auto factories’ strikes, will be made up in July. Generally speaking, almost all enterprises have achieved excellent performances in the first half year. The growth in national economy turns to slow down. Therefore, these two factors could cause some enterprises rush to purchase vehicles in July. As the World Cup is about to draw its curtain, the sales may edge up in the next half month. Due to high expectations from whole-vehicle enterprises, it's necessary to enforcement automakers' promotional activities. As no consumers wait to purchase cars with cash in hand, promotional activities could not expand the market, but it could seize the counterparts’ market share effectively.

　　The auto sales are forecasted to be 17.5 million units in 2010.

　　Last year, people all reached a consensus that the auto growth will be slowing down in the middle of the year. According to China Passenger Car Association, the domestic sales of passenger cars in the broad sense amounted to 6.31 million units in the first half year, while the wholesale auto volumes accumulated to 6.72million units. In this case, the number of China's wholesale auto could achieve 9 million units in the first half year. Even if there is no auto growth in the next half year, the sales will amount to 16.55 million units in 2010, surpassing any predictions of China’s auto sales by all institutions, except China Passenger Car Association. As usual, the sales of the first half year will be lower than that of the next half year. As the auto market returns to a normal track from its previous sales boom, the lower sales volume of the last half year will be expected. Nowadays, there will be no negative growth in monthly sales, and no more new policies targeting the auto market. The policy of cars to the countryside, along with the reduction of sales tax for cars below 1.6L engine displacement, will be expired till the end of the year. Therefore, it’s inevitable to witness the auto growth in the next half year. According to the above situation, China Passenger Car Association has made an adjustment to its annual wholesale auto volumes: from 17 to 17.5 million units.

　　Consumption credit is not enough to support the auto market.

　　Due to the slight adjustment to the financial policy, a great number of banks extended the approval for auto loans, and raised auto loan interests. Some banks raised fees by 0.5% or 1% of the auto price, when consumers paid off installment loans with credit cards. Other banks with small credit limit even temporarily halted the business of auto loans. Although auto finance companies have gained advantages with its simple and fast approval procedures, above 80% of car consumers still chose banks due to the low interest rates. For instance, according to China Citic Bank, for a one-year auto loan, consumers have to pay 6-7% interest rates. Nevertheless, the interest rates will be above 8% charged by Volkswagen finance company. Auto finance companies couldn’t attract more consumers in China because of their difficult financing and high interests. Those above reasons have declined the ratio of auto consumption credit in car purchases to 7%. As the new property policy shrunk the housing loans, banks restarted to focus on auto loans. However, the new policy of auto consumption credit is yet to released, the ratio of auto loans this year will remain the same as last year at most. Thus, the auto consumption credit could not support the auto market. As this situation won’t continue, the auto market will see its great potential from now on.

　　Don’t ever look down upon the minibus market

　　The minibus market gained the highest growth last year, and achieved excellent performances as well in the first quarter. As for famers, the largest and poorest population in China, when they had enough money, they must purchase cars last year. For others who didn’t, they would purchase cars during the spring festival. Thus, minibuses are a kind of practical transportation for farmers to carry large consumption or agricultural means of production. What they lacked is not the concept of vehicle purchase, but money and credit support. From April, the growth in monthly minibus sales has declined compared with the same period of last year. This situation won’t continue. As the state’s three stimuli won’t be effective until the end of the year, including the preferential purchase tax, cars to countryside, and vehicle trade-in subsidies, famers will go home with their annual savings, plus revenues from the autumn harvest. Thus there will be another round of sales surge at that time. Minibuses probably won’t gain the lowest growth among passenger cars this year. As the policy of cars to countryside will be expired in the end of the year, the inevitable negative growth in minibuses, minitrucks and microtrucks will have a huge influence on the auto market. With the help of the policy of cars to countryside, famers are easier to start a new business, get employed and shake off poverty. In addition, these cars seldom go to congested cities. Even the unsuccessful vehicle trade-in policy would continue, not to mention the effective policy of cars to countryside.

　　The pressures of the auto costs greatly cushioned China’s policy and economy from the effect of Toyota auto factories’ strikes.

　　Low incomes of China’s migrant workers have not only stimulated capital accumulation, but also widen the gap between the rich and the poor. According to the figure released by All China Federation of Trade Unions, 23.4% of workers haven’t enjoyed the increase in incomes for five years, and the ratio of incomes to GDP has dropped for 22 consecutive years. Owning to last year’s financial crisis, there was no increase in the minimum wages, which has caused the rural labor force disaster earlier this year. It’s quite common for some private enterprises, or Taiwan, Hongkong, or South Korea invested enterprises that the incomes of migrant workers have to follow local standards of minimum-incomes. Low incomes and illegal extended working hours are everywhere in China's factories. Thus, the migrant workers, who have been marginalized, can’t truly taste the fruits of economical development. It has intensified the contradictions between the labor and the society, which is the greatest injustice in China. However, local government has paid more attention to GDP, while neglected the worker’s rights and interests. In addition, trade unions did noting to solve the industrial disputes, even stand on the side of the capital to impose physical conflicts to workers. Moreover, the widest gap between workers in auto industry has caused several strikes of Toyota auto factories. Their strategies and increases in wages are considered as the pioneer of the labor movements, lifting a new surge in incomes all around the country. Those strikes, sweeping from North to South, from large, medium enterprises to small enterprises, have played a significant role in China’s politics and economy.

　　Except slave factories, the government can stand up with other practices against national Labor Law. Some trade unions existed in name only, but overestimated the new generation of migrant workers, whose quality has been greatly improved. There is no specific organization or government agency to protect migrant workers’ rights and interests. Thus, it’s necessary to revise Labor Law and Trade Union Act. There should be detailed explanations on strikes according to the law. As the problem of survival has been solved, new generation of migrant workers with comparably higher culture and technique level resulted to the ever-increasing demand for democracy and equality. China has become a middle-income country, and the labor-intensive industry is about to die out. However, China’s economic transition is started relatively slow and late. Those are China’s current greatest political and economic problems nowadays, which will bring about endless trouble, if they haven’t been solved very well. But on the contrary, the increase in incomes could transform labor-intensive industry into technology-intensive industry, and solve the graduates’ employment which has been a big headache for the government for years. In addition, labor-intensive industry moving to the west could stimulate the economic development in the central and western regions. Getting rid of slave factories could enlarge the employment; the fast growth in migrant worker’s incomes could stimulate the national consumption, made the economic development become less dependable on the export, narrow the gap between the rich and the poor, alleviate the social problems, and strengthen the society’s stability and harmony. At the same time, China’s competition between the reductions in auto prices will come to an end. (Translator/ Qinghua: serena)

　　See original Chinese report please click: http://raodaauto.blog.sohu.com/156087474.html