Domestic automakers continue to shed market share

China's passenger car sales increased by 13.85 percent year-on-year in May but the market share of homegrown brands further dropped in the month, data from the China Association of Automobile Manufacturers (CAAM) showed Tuesday.

On a monthly basis, passenger car sales dropped 1.16 percent in May to a total of 1.59 million units, the second monthly drop in a row. Sales dropped 5.91 percent in April, CAAM data indicated.

In the first five months, total sales stood at 8.07 million units of passenger cars, up 11.13 percent on a yearly basis, according to the CAAM.

Auto sales in China totaled 9.83 million units during the same period, up 8.97 percent year-on-year.

Experts noted that April and May have been a low season for passenger car sales and the market will still report high growth this year.

"China's passenger car market is expected to continue to report double-digit growth as long as there is no sharp slowdown in the overall economy," Zhang Yu, managing director at Shanghai-based consultancy Automotive Foresight, told the Global Times Tuesday.

A dealer inventory index from the China Automobile Dealers Association reached 49.3 percent in May, approaching an alarming level of 50 percent. The index was 3 percentage points higher than that in April.

Wu Shuocheng, editor-in-chief at industry portal auto.gasgoo.com, noted that car manufacturers may have chosen to deliver more cars to dealers in order to meet their half-year target, which could partly explain why the inventory index went up. "I don't think the demand is shrinking," Wu told the Global Times Tuesday.

CAAM data showed that homegrown brands sold 3.06 million units of passenger cars in the January-May period, up a slight 0.94 percent year-on-year. Market share of homegrown passenger car brands dropped 3.83 percentage points to 37.97 percent in the period from a year earlier.

The share of homegrown sedan sales fell 5.67 percentage points to 22.5 percent in the same period.

In the first five months, German automakers accounted for 21.49 percent of the passenger car market, followed by Japanese automakers with 14.9 percent and US companies with 12.65 percent.

An increasing number of foreign auto brands have begun to roll out cheaper models, which has been the main reason behind the drop in domestic brands' market share, which may continue to shrink in the future, Zhang noted.

German carmaker Volkswagen said at the Beijing auto show in April that it will roll out models priced at around 50,000 yuan ($8,005) in China, which will further squeeze the market of domestic companies.

Following Beijing and Guangzhou, Tianjin and Hangzhou decided to place restrictions on car purchases in December and March, respectively.

Experts noted that the purchase restrictions will hit domestic carmakers harder as people will prefer to buy more expensive cars if they finally get a coveted car plate.

The market share of domestic carmakers has been registering continuous year-on-year drops since September last year. However, Li Wanli, a deputy secretary-general at the CAAM, said that the drop may be only a short-term phenomenon and the situation may get better in 2015.

"There is no reason to lose faith in domestic brands," Li told the Global Times at the sidelines of a press briefing on Tuesday.

Market share of Japanese passenger cars rose to 15.9 percent in May compared with 13.6 percent in January, but Zhang noted that it will be difficult for them to regain the share of around 20 percent - the level before the Japanese government announced to "nationalize" the Diaoyu Islands in September 2012 which aggravated anti-Japanese sentiments and greatly dented Japanese carmakers' sales in China.