China needs to rev up stimulus measures to repair broken down car sales, analysts say

As China’s car sales head towards an expected 14th consecutive monthly decline in August, calls have been made for additional and more powerful purchase incentives after three previous measures intended to boost purchases have so far failed to halt the longest down cycle on record in the world’s largest auto market.

Since July 2018, sales of passenger vehicles have fallen for 13 straight months on year-on-year basis, and while figures for August have not yet been released, preliminary data suggests they fell for a 14th consecutive month, according to the China Passenger Car Association, an industry group that tracks weekly data reported by car manufacturers.

This is despite Beijing having rolled out three measures intended to boost purchases, with the latest coming last week from the State Council which asked local governments to loosen or abandon purchase limits put in place to reduce air pollution, to provide support for purchases of new energy vehicles and to open up the second-hand car market.

“There are a series of reasons for stalled sales: tighter terms for vehicle financing, the increased popularity of ride-sharing and a heightened environmental sensibility. But a more tenuous economic outlook is also at play. No matter the country, households don’t extend themselves when the future is uncertain,” said Carl Tannenbaum, chief economist from financial services firm Northern Trust.

Car sales are a key component of overall Chinese consumption, accounting for roughly 10 per cent of total retail sales, which grew 8.3 per cent in the first seven months compared to a year earlier. Excluding cars sales, this growth would have been higher at 9.2 per cent.