China’s auto and housing markets weaken

China autos.pngThere are 64.5 million empty apartments and houses in China’s urban areas“, according to Barrons, the US investment magazine.

The figure comes from a survey of the country’s electricity meters, undertaken by China’s Academy of Social Sciences.

To date, China’s homebuyers remain convinced that home prices cannot fall, as shown by their willingness last year to buy apartments in the empty city of Ordos. But as Barrons notes, the empty stock is 5 times the current total in the USA, where prices have now fallen over 30%.

China’s auto markets are also showing signs of weakness. Inventories rose to 55 days in June, from 41 days in February, according to the China Automotive Technology & Research Center (CATRC). And H1 production exceeded sales by 1.29 million vehicles.

As a result, price wars are beginning to develop. Bloomberg cites a Zhengzhou dealer offering 21.5% discounts on the cheapest autos, such as Matiz’s $6k compact. It says luxury autos are holding their prices better, but 7% discounts are common on $15k autos.

And whilst manufacturers are still pushing sales, the head of the CATRC has suggested “automakers should reduce supply rather than getting into a price war“. This may become inevitable in H2. Bloomberg notes that both Credit Suisse and IHS Automotive expect demand to actually drop in H2 compared to 2009 levels.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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