German carmakers are considering shipping more vehicles to the United States rather than China as demand in the Asia nation is expected to slow due to its slumping economy and turbulent financial markets.
Reuters reported that U.S. auto dealers expect more to get more Mercedes, Audi and BMW sport utility vehicles given the economic challenges in China, which had been competing with the United States for that type of automobile.
The Wall Street Journal said in another report that German automakers may be the hardest hit among the industry players by the coming slowdown in China since they had benefitted the most from the boom there.
The impact of China's slowdown has been reflected in the share prices of German automakers as investors worry about performance. The Journal said that share prices of BMW and Volkswagen have both tumbled by more than a third since peaking on March 16.
The Journal pointed out that German carmakers produced 4 million vehicles in China, with output rising be more than a quarter since 2005. It added that the growing affluence of ordinary Chinese fuelled the demand for its luxury cars.
The report, however noted that China's economic challenges are not the only hindrance to growth. The government's corruption and austerity drive, car ownership restrictions to improve urban air quality and the yuan devaluation have also weighed down growth and led to price cuts. The dwindling demand have also forced car companies to cut down plant production as inventories build up.
Reuters said in its report that automakers may opt to ship the production of their plants in China to other markets, with General Motors Co. already considering exporting Buicks from its facilities there.
Although the current demand outlook for China is challenged by the economic situation, the Reuters said global automakers still believe that the market has much long term potential. The Journal said the expansion of the middle class will support long-term growth.
