Capitalism is working as intended in the Chinese automotive market.
A surge of competitors into the country is leading to intense competition that’s driving down prices and/or boosting incentives. CNBC today writes about the flurry of companies offer 0% interest loans for five years, some without even a downpayment. In addition, some are offering insurance subsidies.
This is good news for China as it can sharpen its competitive edge as it continues to fight for global market share but it’s not necessarily good for China. It could signal consumer softness and underscores the urgency that Chinese officials need to take to aid consumers.
On the weekend, Chinese CPI ran at 0.5% y/y. That’s the highest in five months but it’s still way below a healthy level. The PBOC has cut rates but it’s hardly enough; as the car price war shows.