China's biggest auto show opens amid growth slowdown

SHANGHAI (AFP) - Global car makers showed off hundreds of vehicles in China's commercial hub Shanghai on Monday, as the world's biggest auto market continues to attract despite a sharp deceleration in sales growth.

At China's premier auto show, foreign car makers admitted an economic slowdown in the world's second largest economy had taken its toll, but said the market was simply too big - and important - to ignore.

China's economy expanded 7.4 per cent last year, the slowest in nearly a quarter of a century.

"The market will increase less than in former years, but still much higher than in any other relevant automotive market in the world," President and CEO of Volkswagen Group China, Jochem Heizmann, told reporters on the eve of the show.

"It's still a tremendous market," he said.

Vehicle sales in China reached 23.49 million last year, well ahead of the United States, which it overtook in 2009.

But annual sales growth halved to 6.9 per cent last year from 13.9 per cent in 2013, according to the China Association of Automobile Manufacturers (CAAM).

The slowdown continued in the first three months of this year, when sales rose just 3.9 per cent.

At the show, a rumoured ban on scantily clad models appeared to be in effect, as car makers used demurely dressed attendants and dance shows to draw attention to their stands at a sprawling new venue.

Among the bright spots in China is the market for SUVs (sport utility vehicles), one of the country's fastest growing segments.

"By 2018, China is expected to be the biggest market in the world for SUVs," John Lawler, Chairman and CEO of Ford Motor China, told a news conference on Monday.


Ford is introducing seven new vehicles in Shanghai, including two SUVs and the Taurus, intended to be its flagship sedan for the China market.

But the "premier" car segment - which sells for US$33,000 to US$197,000 - and the even more pricey luxury market have been slammed by the economic slowdown as well as a more than two-year campaign to crack down on corruption and government waste.

"There's an impact from a cultural standpoint about showing off your wealth in China right now," said Luca de Meo, member of the board of management for sales and marketing at Germany's Audi.

"It could have an impact on the automotive business and we're seeing it already in the high-end segment. There are less goverment-related purchases as well," he told AFP.

Supported by Chinese government backing, auto makers are making a renewed push for new energy vehicles, displaying the latest fully-electric models and hybrids at the show.

Volkwagen announced plans to locally produce more than 15 new energy vehicles in China in the next four years, while General Motors will launch a plug-in hybrid version of its Cadillac brand CT6 sedan.

But the Chinese market for electric cars remains small with consumers reluctant owing to perceived problems with reliability and access to charging facilities.

Electric and hybrid vehicle sales in the country reached 26,581 in the first quarter of this year, three times the same period in 2014 but still accounting for less than one percent of total sales, according to the CAAM.