Carmakers are in for a prolonged “painful adjustment” in China, with production set to exceed sales by the widest margin in at least eight years, according to industry researcher LMC Automotive.
Auto production exceeded sales by 140,000 units during the first five months of the year, LMC said Tuesday in an e-mailed report. The gap was 270,000 vehicles in 2014, or 1.4 percent of total production, the highest since 2007.
Both domestic and foreign carmakers are building more factories in China than anywhere else, posing a risk to profit margins in what remains one of the world’s most lucrative auto markets. Automakers have slashed prices as demand slows with the economy and as more cities impose restrictions on vehicle registrations to control congestion and pollution.
“The painful market adjustment currently under way is far from over,” LMC said in the report. The researcher said it was reducing its full-year estimate for passenger vehicle sales by about 100,000 units.