Automakers to make fewer cars in China

An Audi AG concept vehicle at the annual international auto expo in Shanghai this year. Global automakers will manufacture fewer vehicles in China this year than they are able to because of slowing demand in the world's largest market. [Photo/China Daily]

Global automakers will manufacture fewer vehicles in China this year than they are able to because of slowing demand in the world's largest auto market, a reversal after years of rushing to build factories.

The average level of capacity utilization across international auto brands has fallen to 94.3 percent in the first half of this year, dropping significantly below 100 percent, according to Sanford C Bernstein analysts led by Robin Zhu.

Foreign carmakers will have to accept lower utilization rates in the future, they said.

"We are confident 2015 will be remembered as a turning point in industry capacity utilization," Zhu wrote in a report on Thursday. "We still expect China to sell a lot more cars in the coming years, but returns in the market may never be the same again."

Domestic and foreign-based carmakers are building more factories in China than anywhere else, a construction binge that is taking place amid a turn in the world's largest auto market. China's passenger-vehicle sales fell for the first time in more than two years as the nation's economic growth slowed and a stock-market rout dented buying sentiment.

Dealers have stepped up incentives to clear their excess stock, with the average retail discount for compact sedans rising to 14.4 percent in June from 9.5 percent in March, Bernstein said in its report. More carmakers will extend financial aid to their dealers, which are struggling amid the slowdown, said the brokerage.

"We believe abject dealer profitability now represents one of the biggest issues facing the industry," Zhu said.

Audi to replace country chief amid slowdown

Audi AG is replacing its top China executive from Sept 1 amid slowing growth in its largest market.

Dietmar Voggenreiter, who headed the China business since 2007, will be replaced by Joachim Wedler, the company's head of product planning, Audi said in an e-mail statement. The company declined to give details of Voggenreiter's new role in the company's headquarters, which he will assume at the end of the year.

Sales at Audi, Volkswagen AG's premium unit, fell for the first time in more than two years in May and again in June, as the Chinese auto market weakened after economic growth moderated and a stock market rout soured consumer sentiment. Demand for luxury vehicles slowed for foreign automakers in China even as they stepped up discounts to woo buyers.

Under Voggenreiter's leadership, Audi's annual sales have jumped sevenfold, accounting for 2.5 million of the 3 million Audis ever sold in China, the company said. The pace of growth has since slowed, with deliveries increasing only 1.9 percent in the first half of this year. The brand remains the top-selling premium marque in China, ahead of BMW and Daimler AG's Mercedes-Benz.

For Wedler, it will be his second stint in China.