Volkswagen Tumbles After Slashing Outlook For Chinese Auto Demand

Volkswagen shares tumbled as much as 6% on Wednesday, after the President and CEO of Volkswagen China told Nikkei that the company will likely end the year with flat or lower sales volume in China compared to last year. Previously, Volkswagen had expected 4% growth in China this year; the sharp downward revision makes Volkswagen the latest in a line of car manufacturers and dealers to paint a dismal demand picture in the global automotive industry. 

China is the Volkswagen's largest single market, contributing more than 40% to global sales last year, inclusive of Hong Kong.

Jochem Heizmann, CEO of Volkswagen China, tried to make the point that the automobile market in China was still a ways from hitting its ceiling, saying that low single digit growth, should it occur, still represented a significant amount of business for any carmaker in such a large country. The company's shareholders did not agree.

Speaking to Bloomberg, Heizmann said that "hopefully, the decline of the market in connection with the China-U.S. problems is temporary." Because if it's not, the world's auto OEMs will have major problems.

He then stated that he thought VW had "good chances" to grow faster than the industry for the rest of the year on account of its numerous coming SUV launches. 

These concerns about China echo concerns Renault raised on its recent earnings report. Renault just posted a larger drop in third-quarter sales than analysts expected. Renault blamed the poor numbers on a global slowdown in sales in places like China and Iran, as well as on new emissions standards.

Needless to say, if virtually every single automaker is now cursing they day they decided to expand into China, one can only imagine what China's real, not fabricated 6.5%, GDP number must be if the middle class, at least as measured by its auto purchases, has hit a brick wall.

Meanwhile, just yesterday, we discussed  how the U.S. automobile industry decline was accelerating during the month of October. 

Scott Adams, the owner of a Toyota dealership in Lee’s Summit, Missouri, told CNBC: “We are definitely seeing business pull back. September was off some, but this month our car sales are down 12 percent and our truck sales are down 23 percent.”

Mark Scarpelli, president of Raymond Chevrolet and Kia in Antioch, Illinois stated that "Customer traffic has moderated. There is a little bit more of a pause because of the higher interest rates." He said that although sales are keeping pace with the prior year, people are taking longer to buy.

So between sharp declines in auto demand in China, Europe and the US, how long before the phrase "automotive recession" becomes watercooler talk.