China’s car sales fell for a third straight month as a slowing economy and an intensifying trade dispute with the U.S. spooked consumer demand, adding to evidence that the decades-long expansion of the world’s largest market is grinding to a halt.
Purchases of passenger vehicles by dealerships declined 12 percent to 2.06 million units in September, the China Association of Automobile Manufacturers said in a statement on Friday. That leaves the market up just 0.6 percent for the first nine months of the year, and the association said fourth-quarter comparisons from 2017 are challenging. An annual drop would be the first in at least two decades.
A slowdown in China — where automakers poured in billions of dollars in the past 20 years to bulk up factories — leaves the industry struggling to find growth anywhere else on the planet. A trade war with the U.S. has already prompted luxury carmakers BMW AG and Daimler AG to warn about lower profits while Chinese consumers staying away from showrooms amid a sputtering economy forced Jaguar Land Rover to shut a factory temporarily.
The slump may be the biggest auto manufacturers have ever experienced in China, said Steve Man, a senior cars analyst at Bloomberg Intelligence in Hong Kong. Weaker brands may be hit disproportionately, and such companies will need to cut prices to drum up sales, Man said. Some carmakers may also be forced to shutter factories to reduce inventories and lower costs, he said.
The slowdown comes just as global brands are making a bigger push into China, helped by the government opening up the economy. BMW on Thursday revealed a $4.1 billion deal to secure control of its Chinese joint venture, becoming first automaker to take advantage of China’s policy to let foreign companies own a majority holding of their local partnerships.
The German luxury-car maker is also among Western brands still boosting manufacturing capacity in China and expand local production of models including electric cars. Tesla Inc. is pushing ahead with plans to set up production in China to gain a bigger slice of the world’s largest electric-vehicle market.
General Motors Co., the largest U.S. carmaker, reported a 15 percent drop in China deliveries for the three months ended Sept. 30, its first quarterly report since the trade tensions with the U.S. began escalating in July. Volkswagen AG and Honda Motor Co. also reported declines in deliveries.
Demand has also been hurt by the phasing out of a rebate on purchase tax that was in place through last year. China’s car dealers are now pushing the government to come up with fresh measures to help spur demand, including changes to the way value-added tax is levied on used cars.
Source: Economic Times