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Chinese Consumers Put New Car Plans on Hold in Face of Escalating Fuel Prices

Chinese consumers are changing their new car purchasing plans or are postponing their purchases due to rising fuel prices, according to a recent Nielsen China survey. Automobile sales in China in August 2008 shrank 6.3% year on year to 629,000 units, the first fall in about two years.

An online Nielsen study looking at the effect of oil price increases in China’s key cities Shanghai, Beijing and Guangzhou, has found that of the 71% of respondents who do not currently own a car around a third claim to be considering buying one. However, because of the high oil prices, consumers are reconsidering their purchasing decisions.

Twenty-five percent will delay their purchase and a further 22% are now no longer in the market to buy a car. For those who remain interested in a car purchase, 18% are considering a fuel efficient car because of oil price increases. A quarter remains unaffected by the oil price rise.

Among all people surveyed, Shanghai consumers are the least likely to be put off by oil price increases and will go ahead with their car purchase plan soon (33%). Beijingers tend to be more conservative and have chosen to put their car purchases on hold (33%) and Guangzhou consumers are perhaps the most price sensitive among those surveyed, with 31% of consumers deciding that they are no longer in the market.

The other least-affected group is high income earners—52% said their car purchase plan remains unaffected or they will consider a fuel efficient model—compared to 57 percent of those lower income groups who plan to delay or put off their car purchase plan.

Oil price increases have had an impact on some consumer groups, however consumer demand is still quite strong, particularly among the younger, middle class. Obviously oil price hikes have had an impact on Chinese consumer’s car buying decisions, including their choice of the types of car they would buy.

—Georgia Zhuang, head of Automotive Research at Nielsen China

Of those intending to purchase a car, more than half indicated that they would purchase a fuel efficient car like a A00 Class (example QQ size-7%), A0 Class (example polo size-16%), A class (example Santana size-26%) and B class (example Passat size-17%).

The A class car was the type of car most considered for purchasing by consumers in Shanghai (34%) and Beijing (28%).

Comments

GreenPlease

Nice to see market forces working. Now if we would only make the true cost of things known...

Mike L

Very true. Imagine how many more people in developing countries (although why we classify China and India as "developing" is beyond me) would delay or put off their purchase if they paid market price vs. subsidized price. That would really help catapult those countries automakers to respond with more efficient and cleaner tech cars.

I should note: I do like China's approach to new car purchase taxes, especially if that money is used towards infrastructure and mass transit improvement/expansions.

Kevin

Is there any real data / studies about an oil price "break point"? Oil can only climb so high that people can afford or would be willing to pay for it. It seems to me that there would be a point where economies cannot support oil (kindof where we are now).

I'd love to read some studies performed by real economists and not by peak freaks or oil execs. A neutral source.

John Taylor

All the Chinese people I talk to are expecting the new electric cars to show up on the market, and soon. They are driving electric scooters and really good electric motorcycles, and are not willing to buy a car that won't have any fuel available.

Despite the media pretending the Electric car is not viable, people know better.

mahonj

@Kevin,
It is pretty high.

It is about $8 / US gallon in Europe (e1.30 ish) / litre, and most people are still driving.

But they are not driving gasoline F150's in any numbers, most SUVs here (Ireland) are diesel, and few are > 3 litres.

The Nissan Qashkai with a 1.5L Renault diesel is very popular. You won't pull tree stumps with it, but it is ideal for the school run and a run to the mall, which is all most SUVs are used for.

I would say it could go to $20 / gallon and most people would drive some times - but you would start to see lots of Jazzes and Yarises and ride sharing.

Treehugger

in a country where the sales of cars were growing at something like 10/15% a fall of 6% is like a cliff. Chineese people start to realize that rushing on cars might be not the best idea. GM who is the first sellers of cars in china might also suffer on this side too ....

zem

6% for August...one month... it's a kneejerk reaction to higher fuel prices & consumers need the time to figure out how that impacts them... I wonder if August 2007 was a particularly strong sales month? that would certainly add to the height of the cliff...

China has some 25 cars per 1000 "eligible" = of age drivers... the US has 998/1000... 25/1000 is about where the US was in like 1910... just for a matter of perspective & to relay the massive market potential... at 50/1000 they will become the largest car market in the world... the power of population... sorta' scary I think...

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HarveyD

@John Taylor:

There is a very high probability that sale of various types/sizes of e-vehicles will take off in China within the next 18-24 months.

The market is there and they can certainly mass produce e-vehicles (10 M ++ a year) at an affordable price.

Will they try to meet the local demand (to reduce fuel consumption and GHG) before exporting to the world?

sjc

I heard that China subsidizes gasoline to around $3 per gallon, but is considering reducing the subsidies. I also read that there was great competition between the two largest service stations to put in new stations and become dominant.

That is something like the past here in the U.S. but I think that they might find better ways of doing things. There are more options to choose from now. The more than 800 million rural poor in China are probably going to stay that way for some time and not drive lots of cars. Nike likes Viet Nam because there are no unions. It is unlikely they will become members of a middle class.

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