You are here: Home » Automobile » News
Business Standard

Bumpy ride ahead: Carmakers in China brace for zero growth after tough 2018

Automobile sales in China fell about 14% in November from a year ago, steepest in nearly seven years and the fifth straight decline in monthly numbers

Reuters 

cars, automobiles, vehicles, China
File photo: MG cars for export wait to be loaded onto a cargo vessel at a port in Lianyungang, Jiangsu province, China

in are bracing for zero to tepid growth in sales this year, after a tough 2018 when the world's top auto market probably contracted for the first time in two decades, as slowing economic growth drags on demand.

Companies from homegrown Geely to Britain's biggest automaker have in recent days flagged caution about sales in 2019, hit also by Beijing's trade war with the United States.

"We should notice the big uncertainties among macro economy and trade tensions, which hit the auto market in last year and may happen again this year," Yale Zhang, head of consultancy AutoForesight, told Reuters.

ALSO READ: China passes law to have own version of Islam, make it conform to socialism

China's top auto industry association expects the country to sell 28 million vehicles in 2019, steady versus 2018, while other government and industry bodies see a 0-2 per cent growth.

China's Association of Automobile Manufacturers is expected to announce later on Monday that China's contracted in 2018, the first time since 1990.

Automobile sales in China fell about 14 per cent in November from a year ago, steepest in nearly seven years and the fifth straight decline in monthly numbers.

ALSO READ: China's population to peak in 2029 at 1.44 billion and then decline: Report

The data adds to worries for investors, already spooked by signs of a broader drop in demand from the world's No.2 economy, especially after Apple issued a rare revenue warning citing weak sales in the country.

Analysts are, however, counting on measures promised by China to buoy spending for some relief.

For a graphic on monthly auto sales in China in 2018, see: https://tmsnrt.rs/2Omlt8r

boost

China's state planner has said it will introduce policies to lift domestic spending on items such as autos, without providing specifics. has also made changes to the income tax threshold to hike incomes and personal spending power.

This could help resolve the industry's current issues of unsold inventory, drive sales growth and provide relief to the economic pressures China is facing, said Patrick Yuan, Hong Kong-based analyst at Jefferies.

ALSO READ: China goes for tax regime change, super-rich fear raid on $24 trn stash

"With that, car sales growth could recover to as high as 7 per cent" this year, he said.

According to Alan Kang, an LMC Automotive analyst, demand could also draw support as consumers stop putting their buying decisions on hold in hopes will reintroduce purchase tax cuts on smaller cars - a policy it phased out last year.

As their hopes for tax cuts "evaporate in 2019", these consumers will trickle back in, he added.

ALSO READ: China's lunar rover leaves first-ever 'footprint' on dark side of the moon

However, some analysts struck a sombre note amid forecasts China's economy would slow further this year. Data this month is expected to show the economy grew around 6.6 per cent in 2018 - the weakest since 1990. Policy sources have said Beijing is planning to set a target of 6-6.5 per cent for 2019.

First Published: Mon, January 14 2019. 11:14 IST