No Beijing Bailout for Chinese Automakers

With China's economy cooling, sales growth is way down at the country's 100-plus carmakers. But the government shows no sign of intervening

Chinese automaker Geely reported sales for October dropped 7.4% from last year.

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By Chi-Chu Tschang

November 21, 2008 at 10:01 AM UTC

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As China's economy boomed during the past few years, dozens of Chinese companies jumped into the car business, setting up factories to produce autos for the growing middle class. Thanks to those new automakers, many of them backed by local governments, today there are more than 100 Chinese auto manufacturers with a combined production capacity of over 9.6 million vehicles, according to Changjiang Securities. Problem is, Chinese purchased only 8.8 million vehicles last year, according to official figures.

Now, with the global credit crisis cooling China's economy, demand for cars is growing even weaker. Growth in auto sales is expected to be just 5% this year, compared with 22% in 2007, estimates the China Passenger Car Assn. On Nov. 11, Geely reported sales for October had dropped 7.4% from last year. Last month, SAIC Motor reported quarterly profits dropped 78%, to $38 million; the Shanghai automaker's stock price has dropped 78% this year, compared with a 62% fall in the Shanghai stock index.