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U.S. auto market remains bright spot as China pulls back

4 min read
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DETROIT (AP) — U.S. auto sales remain a bright spot in a global car market encountering turbulence in important countries such as China.

It’s a complete reversal from six years ago, when U.S. vehicle sales plunged during the recession and China easily surpassed the U.S. as the world’s largest car market. China remains No. 1, but sales there are slowing as the economy cools and cities impose car ownership limits to curb smog and congestion. That leaves automakers relying heavily on the U.S. and Western Europe, where a recovery in car sales is finally underway.

Sales figures for August released Tuesday by Sweden’s Volvo Cars tell the story: Volvo U.S. vehicle sales jumped 18.3 percent as the new XC90 SUV went on sale, and they rose 6.5 percent in Europe. But its sales in China plunged 10 percent. One of every five vehicles Volvo sells globally is sold in China.

All major automakers were releasing U.S. sales figures Tuesday, and early reports were mixed. Analysts expect sales of new cars and trucks to decline slightly from last August, but primarily because of a calendar quirk. Labor Day is typically a big sales weekend as dealers hold model year-end clearance sales. Last year, Labor Day weekend was counted as part of August sales. With Labor Day this year on Sept. 7, those sales will be part of September results.

Global figures for August will be released later this month.

U.S. sales remain on pace to top 17 million this year for the first time since 2001. Low interest rates, low gas prices, high consumer confidence and enticing new small SUVs like the Jeep Renegade and Honda HR-V are drawing buyers to dealerships despite some angst in the stock market caused by fears of the economic slowdown in China.

For August, Ford reported a 5-percent gain as sales of its new F-150 gained steam, and Fiat Chrysler’s sales rose 2 percent thanks to strong demand for Jeep SUVs. General Motors said its U.S. sales were flat last month, as it saw strong demand for the Chevrolet Silverado but Cadillac sales declined.

Toyota’s U.S. sales fell 9 percent, hurt by its car-heavy lineup in a market where buyers want SUVs. Volkswagen’s sales dropped 8 percent.

Sales in Western Europe are showing life after years in the doldrums. Through July, sales there gained 7 percent, according to LMC Automotive, a data firm. But sales in Eastern Europe tumbled 11 percent because of the deteriorating economy in Russia.

Now the biggest concern for automakers is China, where new vehicle sales fell by unexpectedly wide margins of 3.3 percent in June and 6.6 percent in July. August sales figures should reflect Chinese consumers’ reaction to a further 12.5 percent drop in the Shanghai Composite Index.

Chinese sales growth peaked at 45 percent in 2009, the same year U.S. sales hit a 30-year low of 10.4 million vehicles. But growth has steadily declined since then. Forecasters who expected sales growth in China of up to 8 percent this year have recently slashed that to as low as 1.7 percent.

Slumping sales are likely to force German automakers, which are unusually dependent on sales to China, to issue profit warnings, said Bernstein analyst Max Warburton in an Aug. 27 report.

If the sales slowdown in China continues, U.S. buyers could eventually see more vehicles imported from China, as automakers try to maximize production at the plants they have built there. Automakers could also shift vehicles planned for China to the U.S., but that could be a challenge because vehicles popular there — like big sedans — aren’t popular here.

“We’re in a wait and see mode for China right now,” said Akshay Anand, a market analyst with Kelley Blue Book.

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