Advertisement
Advertisement
China economy
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
US President Donald Trump claimed China had agreed to “reduce and remove” tariffs on American-made vehicles in a Tweet, although the mainland did not confirm the statement and his advisers were left scrambling for an explanation. Photo: AFP

China’s car sales drop for sixth straight month with November’s 18 per cent decline a further sign of slowing economy

  • Annual figures for 2018 look set to show a first decline in at least two decades
  • BMW AG and Daimler AG have already warned about lower profits, while Jaguar Land Rover have been forced to temporarily close a factory

Car sales in China plunged for a sixth consecutive month, intensifying pressure on global carmakers that have staked their future growth on the world’s largest car market.

Retail sales of saloons, multipurpose vehicles and sport utility vehicles dropped 18 per cent to 2.05 million units in November, the China Passenger Car Association said on Monday.

The size of the fall means the market is all but certain to have its first annual decline in at least two decades.

With the trade war with the US showing no signs of abating, and slumping stocks weighing on consumers’ purchasing power, the market that global carmakers have relied on for growth since the 1990s now risks an extended decline.

Demand is also sputtering in Europe and North America, leaving brands few places to go for growth.

Carmakers, which poured in billions of dollars over the past 20 years to bulk up factories in China, now need to view future expansion plans in a different light.

The trade war with the US has already prompted luxury-car makers BMW AG and Daimler AG to warn about lower profits, while Chinese consumers staying away from showrooms forced Jaguar Land Rover to temporarily shut a factory.

The 2018 Beijing International Automotive Exhibition, also known as Auto China, took place at the China International Exhibition Center New Venue in Beijing in April. Photo: Simon Song

Carmakers’ hopes of a truce in the trade war were boosted last week as a tweet from US President Donald Trump claimed that China had agreed to “reduce and remove” tariffs on American-made vehicles.

China, though, did not confirm the move and Trump’s advisers were left scrambling on how to explain the post.

Beyond a slowing economy, the rising popularity of car-sharing and ride-hailing services is reducing the need for individuals to buy vehicles.

Shared cars used by popular ride services, such as Didi Chuxing, will account for 30 per cent of China’s passenger vehicles and majority of miles travelled by 2025, according to a forecast by Bill Russo, founder and CEO of Shanghai-based consultancy Automobility Ltd. They currently account for 13 per cent of passenger vehicles.

The slowdown has pushed China’s car inventory levels to a record high. An index tracking the volume of unsold cars reached its highest ever reading in November, based on data from the China Automobile Dealers Association.

Ride hailing apps like Didi are becoming increasingly popular in China. Photo: Reuters

China is also escalating its crackdown on peer-to-peer lending, a move that could hardly have come at a worse time for carmakers and dealers.

It dropped 20 per cent in the first half of this year and may shrink even further as policymakers push small- and medium-sized operators to close, according to data compiled by 01Caijing and AskCI Corp.

The challenges are emerging just as global brands are making a bigger push into China, helped by the government opening up the economy.

BMW in October revealed a US$4.1 billion deal to secure control of its Chinese joint venture, becoming the first carmaker to take advantage of China’s policy to let foreign companies own a majority holding of their local partnerships.

Daimler is interested in making a similar move, people familiar with the matter said last week.

Western brands are also boosting manufacturing capacity in China and expanding local production of models including electric cars, with Tesla pushing ahead with plans to set up production in Shanghai.

Longer term, carmakers are betting that growth will return as China’s middle class expands and new electric models will lure consumers back to showrooms.

Volkswagen AG, the top foreign car brand in China, expects the market to be unchanged next year before returning to growth in 2020, its China chief Jochem Heizmann said last month.

Post