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Why are important crude tanker indicators trading sideways?

Part 4
Why are important crude tanker indicators trading sideways? (Part 4 of 5)

Why the traditionally soft July marked a slowdown in auto sales

China’s car sales

Global automakers see China as a major source of growth now and in the future and are spending heavily to develop models for local tastes. That’s squeezing China’s fledgling auto brands, which are growing but steadily losing market share to foreign rivals.

China Auto JulyEnlarge Graph

Consistently growing automobile sales cushion the auto industry, thereby driving oil demand.

The rising purchasing power of consumers in China supports the industry’s growth. This high demand is keeping the country on track to overtake the U.S. this year and become the top oil importer.

Softening July growth

According to data from the China Association of Automobile Manufacturers (or CAAM) for July, total sales rose 6.7% to 1.6 million vehicles compared to the corresponding period a year ago as global automakers outpaced local brands. As per CAAM data, sales by Chinese brands rose 7.7% in July while those of German, Japanese, U.S., and Korean rivals all rose by double digits. Retail deliveries of cars, multipurpose, and sport utility vehicles climbed 11.5% to 1.32 million units in July.

During the first seven months of 2014, vehicle sales in China rose 8.2% from a year earlier.

Traditionally, July is a low season for auto sales in China. Also, due to the World Cup, there’s some impact on China’s auto sales. Passenger vehicle sales growth slowed in China last month as showroom traffic thinned with the summer heat and the soccer World Cup.

July industry-wide vehicle inventories remained at levels that indicate greater pressure and risks to dealers, according to CAAM. Demand is slowing amid an antitrust investigation by the nation’s main economic planner that involves foreign carmakers.

Outlook

CAAM estimates that the market will expand 8.3% in 2014. This expansion would be a slowdown from the 13.9% growth pace of 2013.

The transnational shift of consumers towards premium car purchasing and increasing retail financing penetration rates for foreign-branded cars would drive crude tankers like Tsakos Energy Navigation Ltd. (TNP), Nordic American Tanker Ltd. (NAT), Teekay Tankers Ltd. (TNK), and Frontline Ltd. (FRO). The Guggenheim Shipping ETF (SEA) would also be affected.

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