CAAM cautions against short-term stimuli to fuel lackluster performance

China's vehicle sales tumbled for a fourth month in October, increasing the odds of a whole-year fall for the first time in more than two decades, but officials at the country's leading industry association cautioned against short-term incentive policies.

According to the statistics released by the China Association of Automobile Manufacturers on Friday, vehicle sales in October fell 11.7 percent to 2.38 million units compared with same month last year.

Total vehicle sales from January to October stood at 22.87 million. The growth rate of sales continued to fall and saw a negative growth for this first time this year of 0.1 percent compared with same period last year, according to the association.

Passenger cars are the main body of the market and their October sales reached 2.05 million last month, falling 13 percent year-on-year.

And a total of 333,300 commercial vehicles were sold in October, a decline of 2.83 percent compared with same month last year.

The passenger vehicle sales for the 10 months through October fell 1 percent from a year earlier to 19.3 million vehicles.

The result was a combination of factors, including the current economic climate and declining consumer confidence, Yao Jie, deputy secretary-general of CAAM said on Friday.

He said: "China used to release some policies to encourage the auto market in 2009 and 2015, and played a certain role. But these policies were double-edged. The recent decline is partly led by them, as the incentives made early release of market consumption."

China should deepen the supply-side structural reforms, achieve enterprise transformation through real market demand and promote the survival of the fittest to form a benign market, instead of relying too much on the policy incentives, Yao said.

In the meantime, global carmakers are struggling amid a downturn worldwide, not only in China, Yao added.

Last month, Hyundai posted a 68 percent plunge in its third-quarter net profit and reported its operating margin shrank to 2.7 percent in the January-September period.

Another example is Ford's China sales slumped 43 percent year-on-year to 64,383 in September, marking a row of sales falls in the country. The continuous decline over the past months resulted in a 30 percent fall year-on-year to 585,171 units in the first three quarters.

Under these circumstances, "Chinese carmakers are under greater pressure to compete with those international auto brands," Yao said, "Because most of the vehicles of local car manufacturers are positioned as mid- and low-end in terms of product structure, which are easily affected by the slump in the auto market."

The statistics of CAAM showed that sales of Changan Automotive fell 7.2 percent to 1.26 million from January to October and Great Wall Motor's sales slipped 3.3 percent year-on-year to 787,000 units.

New energy vehicles, however, still performed well amid the downturn in the broader automobile industry.

That sector, consisting of electric cars and plug-in hybrids, reached sales of 137,900 units in October, up 51.01 percent from the same month last year, according to Chen Shihua, an assistant to the CAAM's secretary-general. The growth rate from January to October stood at 75.6 percent, bringing sales in the 10-month period to 860,100 units.

"New energy vehicle are now more developed in terms of range, safety and other sectors and are thus being accepted by more customers. Plug-in hybrids also better meet the demands of Chinese customers," Chen said. The government has also intensified its efforts to encourage the use of new energy vehicles to ease pressure on the environment by offering tax exemptions and discounts on car purchases. The association believes that NEV are likely to exceed 1 million this year, up from 777,000 units last year.