Seems like the country that keeps on giving has just about run out of steam. China is experiencing a investor led run on its stock markets and suffered its first ‘Black Monday’ since 2007 a term usually refereed to when a stock market crashes after shares are sold quickly in a short space of time.
This happened on the back of news relating to China’s economy which is expected to slow after experiencing rapid growth in the last few decades. Stock markets are all about confidence, if investors feel their stock will devalue at a not too distant future date then they will sell the shares early in order to minimise any potential future losses.
Some investors are so attuned to the volatility of stock markets they actually buy and sell shares so quickly that it can trigger a stock market collapse. That hasn’t happened to China’s stock market just yet but this ‘run’ has led to billions being wiped off the value of the Shanghai Composite, China’s main stock exchange.
China’s stock market has been further fueled by investors borrowing money to buy shares. The Chinese government intervened by shoring up the markets but it seems the damn is close to bursting and car makers are looking on with worry. The worry is that people will have less money to spend if there is a sudden collapse.
That said car makers like Daimler still believe China will see growth in demand for their products and as such will keep on investing in China.Hubertus Troska, head of Daimler China, told reporters Monday in Beijing“I am still positive, subject to some stabilization of the stock market. I am still confident Daimler will sell significantly more than 300,000 units in China this year.”
Daimler is still on course to increase dealerships and broaden its compact car output, the company expects car ownership to increase despite the country’s stock market wobble. However dealerships are having to offer generous discounts to tempt new buyers into the showrooms, demand for new car registrations in China has dropped to a 17 month low.
Mercedes is weathering the storm and expects deliveries for the new long-wheel base C Class to grow which will keep it on track to exceed global annual sales. Mercedes are stretching ahead of rivals such as Audi and BMW who recently saw a decline in sales of 13 percent and 7 percent respectively.
The Chinese government has devalued its currency in a bid to combat the stock market slide but Mercedes says this will have little impact on its gross profits.