VW July sales suffer on China, lack of new products

FRANKFURT: VW brand sales in China dropped 12.9 percent in July, exacerbated by a lack of new products and leading to a 3.7 percent slide in Volkswagen Group sales, analysts estimate.

Caught up in a broader economic slowdown, demand for cars in China has suffered, leaving carmakers like Volkswagen exposed. Last month, the China Association of Automobile Manufacturers (CAAM) cut its 2015 forecast for sales growth to a meagre 3 percent from 7 percent.

"In addition to adverse regional mix trends, the VW brand appears to be challenged by a lack of product momentum," analysts at Evercore ISI said in a note on Wednesday. In the January to July period, group sales were down 1 percent, at 5.83 million cars, VW said late on Tuesday, but declined to break out figures for monthly group or brand sales in China. "The overall economic situations in China, Russia and Brazil remain difficult.

As before, the Volkswagen group has not been entirely immune to these developments at the beginning of the second half," head of group sales Christian Klingler said in a statement.

Evercore ISI analysts said the decline in demand had eased somewhat in August compared with July, judging by data from the China Passenger Car Association, which showed that in the first two weeks of August, retail sales were up 5 percent while wholesale deliveries were down 4 percent.

In a bid to kick-start its wavering economic growth, China cut interest rates and banks' reserve requirements this week, a move welcomed by automakers.

A spokesman for Daimler Financial Services said: "We appreciate the Chinese Central Bank's decision. Our automotive financing business in China has developed very positively over the past few years.

The decision to cut the required reserve ratios by 3 percentage points means further tailwind for automotive finance in China."

Thanks to a raft of new vehicles hitting showrooms in China, including the Mercedes-Benz C-Class, sales of Mercedes passenger cars in China rose 38.5 percent in June and 41.5 percent in July.