China’s falling auto sales have been at the forefront of concerns that its economy is slowing much faster than expected, weighing on oil prices.
Yet moves to cut the cost of car-financing as part of economic stimulus efforts this week may not be enough to drive up auto sales or boost demand for oil, analysts said.
Domestic car sales have fallen since April, dropping by 7 percent, or more than 100,000 cars, in July from a year ago and likely putting out of reach even a revised 2015 vehicle growth target of 3 percent, down from 7 percent previously.
The downturn has already hit oil markets as importers and refiners adjust their order books.
To stem the tide, China’s central bank has cut interest rates and reserve requirement ratios for banks by 25 basis points and lowered reserve requirements for auto and financial leasing companies by an additional 300 basis points.
The move reflected the role of car sales as a key driver of consumption, manufacturing and also future oil demand, but analysts questioned its impact.
While the measures would make it easier to finance cars, they offer largely “psychological support” as most Chinese car-buyers still pay in cash, without financing, said Yale Zhang, head of Shanghai-based consultancy Automotive Foresight.
China’s giant car sector, the world’s largest, could prove a major engine for growth including commodities and oil, said Frederic Neumann, co-head of Asian economic research at HSBC in Hong Kong, but he added that boosting car sales by itself would not be enough to halt China’s sliding growth.
“A lot more will need to be done, including monetary and fiscal easing, to help stabilize growth.”
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