Stock market fallout hits sales of mass-market car brands in China

The great Chinese stock slump that first pummelled luxury car sales is spreading to mass-market brands as potential customers like Zhang Jiabin count the cost of soured investments.

The 37-year-old food company executive lost nearly US$6,500 when shares tumbled in June and July, and cannot now afford the new Volkswagen Tiguan SUV he had his eye on.

"I can't draw money," Zhang said. "I'll wait until (the market) goes up."

Car sales in China fell 7.1 per cent last month from a year earlier as many more who lost out in a trillion-dollar share slump joined Zhang in delaying purchases. The monthly drop, the biggest in two and a half years, was the fourth in a row and marked China's longest streak of sales declines since at least the 2008 global financial crisis.

Sales for January to July grew only 0.4 per cent, the slowest first seven months of the year since at least 2009, and global brands from Ford Motor to Nissan Motor are bracing for a sustained period of dwindling demand and depressed prices. That will squeeze profit, create an inventory burden for dealers and ramp up already-fierce competition.

Managers and executives at major global carmakers on the mainland say that leaves companies now pushing staff hard to meet targets despite the bleak outlook. Gloom over China's economy was highlighted yesterday when it devalued the yuan.

At Volkswagen, China's best-selling car brand, a regional manager at a sales subsidiary said the carmaker is urging staff continue to meet targeted sales numbers to protect its market share, forcing inventory on dealers that will bite into their profit.