Shanghai, China - J.D. Power and Associates has reduced its forecast for passenger vehicle demand in China, amending its estimates from 6.2 million units forecast at the beginning of the year to 5.95 million units for 2008. The revised forecast is still a 9.7 per cent increase from the 5.42 million passenger cars sold in China in 2007, but marks the first time since 2003 that year-over-year growth is below 10 per cent.

Sales of cars, SUVs and minivans increased by only 8 per cent in April, 15 per cent in May and 17 per cent in June, compared with first-quarter 2007 growth of 21 per cent.

Factors believed to have contributed to the slowdown include a drop in the Shanghai Stock Exchange Composite Index; 7 to 8 per cent inflation in China affecting buyers’ disposable income; slowing exports due primarily to economic difficulties in the U.S. and appreciation of the Chinese RMB against the U.S. dollar, affecting the purchasing power of factory owners and workers whose businesses depend on exports; the massive earthquake in Sichuan province in early May, which affected new-vehicle demand in Chengdu, China’s fourth-largest city market; and a government increase of about 17 per cent on gasoline prices in June. The price rise brought prices from an equivalent of US$2.85 per gallon to US$3.36.

“Car dealers in Shanghai, Beijing and Shenzhen reported lackluster demand for new vehicles,” said John Bonnell, director of J.D. Power Asia-Pacific Forecasting. “Ebbing consumer confidence, coupled with higher gas prices, is likely keeping many shoppers out of the showrooms. After the increase in the price of gas, look for Chinese buyers to become more discerning about the vehicles they buy. Much like American consumers, Chinese buyers will look for mdoels that offer adequate size and better mileage. The five best-selling models in China this year are all powered by engines smaller than 1.8 litres.”