The Effects of the Global Financial Crisis on Automobile Demand in China

Abstract

This paper examined the factors influencing Chinese auto demand from 2001 to 2013, using multi-regression analysis. This study also investigated the effects of the recent global financial crisis on Chinese automobile demand, and compared the results with those found for three different periods of time. According to the empicral results, the main factors influencing the quantity of Chinese automobile demand before the global financial crisis were the price of automobiles, the price of gasoline, the lending rate and the personal disposable income. The main factors of influencing the Chinese auto demand during the global financial crisis were the price of automobiles, the lending rate and the personal disposable income. Only one main factor influenced Chinese auto demand after the global financial crisis, and this was the personal disposable income. The income elasticity of the demand was 0.270, 0.928 and 0.243 before, during and after the global financial crisis, respectively. The results show that automobiles are a normal good and that the personal disposable income is a very important factor in people's decisions whether or not to purchase an automobile in China. Moreover, automobiles were almost a luxury good during the global financial crisis, with the influence of personal income rising more three-fold during this period. Furthermore, the effects of the global financial crisis on Chinese automobile demand has been very significant.

Macroeconomic Determinants of Auto Sales in ASEAN: An Empirical Study in Five Major ASEAN Countries

“…At the beginning of economic growth, most countries have a higher cost associated with the interest rate. The research results are in line with Nawi et al (2013); Kaya (2019); Lee and Kang (2015); Pant and Nidugala (2016).…”

“…However, none of them has the same conclusions about the effect of macroeconomic variables on automotive sales. These research includes Chifurira et al (2014), Lee and Kang (2015), Kemal et al (2015), Wen and Noor (2015), Günşen (2015), and others. Pant and Nidugala (2016) investigate and evaluate the impact of macroeconomic indicators on CAR for Indian banks.…”

“…Yagi and Managi (2016) show that a decrease in population and household size in Japan accelerate car ownership. Lee and Kang (2015) conduct a research about the global crisis effect on auto sales in China. This research explores the key variables influencing motor auto sales in China, which are motor vehicle price, fuel price, interest rate, and individual income before the global crisis.…”

Macroeconomic Determinants of Automobile Sales in Indonesia: An Empirical Study in 1986-2016

“…The exchange rate of USD to IDR and interest rate influence automotive demand and selling. (Lee & Kang, 2015). Most of the automotive parts still heavily depend on import from other countries.…”

“…Leasing companies finance most of automotive sales. These financing demands depend a lot on the charged interest rate (Lee & Kang, 2015). The interest rates charged by financing companies depend on the macro interest rate level and inflation.…”