Trade war to rescue China’s stalling car firms as Beijing considers stimulus to boost domestic consumption

China’s embattled automobiles sector is banking on Beijing to rescue it with the introduction of strong incentives as the country seeks ways to shake off the gloom surrounding its escalating trade war with the United States.

Last month, passenger car sales stood at 1.51 million units, a decline of 16.9 per cent from the same period in 2018, according to the China Passenger Car Association. More importantly, April was also the eleventh consecutive month of sales declines for an industry that represents about 6 per cent of China’s economic output.

And industry officials now expect Beijing, as well as local governments, to implement new policies to support the sector. These policies could range from cash subsidies, tax reductions and incentives to boosting second-hand car sales.

“It is pointless to be over pessimistic about the industry, since the government’s bolstering measures will effectively fire up sales again,” said Tian Maowei, a sales manager at Shanghai-based Yiyou Auto Service. “To a certain extent, worries about trade war damage to the economy could prompt the governments to launch incentives sooner rather than later.”

The once-buoyant sector reported its first contraction in sales since 1992 last year, as consumers tightened their belts amid mounting concern about a slowing economy and a trade war in its infancy.

Now, heightened expectations around stimulus mean it has been priced in by the market, with automobile stocks outperforming the benchmark index amid an escalating trade war this month.