Will slowing car sales in China reignite brutal price war in crowded market?

In the most bearish Chinese car market forecast by an international bank or consultancy, AlixPartners has predicted that deliveries will fall by 10 per cent this year on the back of a shaky economy and softening government support.Weak buying interest was likely to fuel a brutal price war that would ensnare nearly all the country’s 100-odd carmakers, the global consultancy added.It forecast that 24.6 million light vehicles would be delivered by Chinese carmakers this year, with 10 million of those to be exported.“Profitability is no longer driven by scale, but increasingly by how efficiently companies are organised, how quickly they adapt product cycles, and how effectively they integrate design, engineering and commercialisation,” said Stephen Dyer, Asia-Pacific leader of the automotive and industrial practice at AlixPartners. “We expect a widening gap between winners and the rest of the industry, with consolidation becoming a structural outcome rather than a cyclical one.”Sales of light vehicles – passenger cars and pickups – slumped 18 per cent in the first five months of this year after Beijing adjusted its subsidy policy and phased out a sales tax holiday.AlixPartners said the predicted 41 per cent year-on-year increase in exports this year, spurred by cost and technological advantages of Chinese-made cars, would not be enough to cushion against an overall fall in sales.It said the 14.6 million light vehicles expected to be delivered to domestic customers this year would represent a 27.7 per cent year-on-year decline.