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China, the world's biggest car market, sees steepest decline since 1990s

China car sales fell 13 percent in December, the sixth straight month of declines, bringing annual sales to 28.1 million, down 2.8 percent from a year earlier

Reuters  |  Beijing/Shanghai 

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 will face more fierce competition this year, after a tough 2018 when the world's biggest contracted for the first time in more than two decades, the country's top auto industry association said on Monday.

Companies such as homegrown and Britain's biggest automaker have already in recent days flagged caution about sales in 2019, hit also by Beijing's with the

fell 13 percent in December, the sixth straight month of declines, bringing annual sales to 28.1 million, down 2.8 percent from a year earlier, China's Association of Automobile Manufacturers (CAAM) said.

This was against a 3-percent annual growth forecast set at the start of 2018 and is the first time China's has contracted since the 1990s.

China's "still faces relatively large pressures in the short-term", senior CAAM said at a briefing, attributing the weak 2018 sales to the phasing out of purchase tax cuts on smaller cars and the Sino-U.S.

CAAM expects the weakness to persist and has forecast flat sales of 28.1 million vehicles for 2019, while other government and industry bodies see a 0-2 percent growth.

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

WINNERS & LOSERS

was the worst performer among global in China last year, with its sales shrinking 37 percent.

Geely, China's most successful carmaker, sold 20 percent more cars in 2018, but this was sharply lower than a 63 percent growth in 2017. It is forecasting flat sales this year.

Japan's Toyota Motor, however, bucked the trend, with a 14.3 percent rise in sales in China, versus 6 percent growth in 2017, helped by better demand for its luxury brand and improved marketing efforts.

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

Analysts are, however, counting on measures promised by China to buoy spending as well as rising demand for new (NEVs) to bring some relief.

NEV sales jumped 61.7 percent in 2018 to 1.3 million units, CAAM said. It sees NEV sales hitting 1.6 million this year.

POLICY BOOST

China's 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 at Jefferies.

"With that, growth could recover to as high as 7 percent" this year, he said.

According to Alan Kang, an 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.

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

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 percent in 2018 - the weakest since 1990. Policy sources have said is planning to set a target of 6-6.5 percent for 2019.

"We should notice the big uncertainties among macro economy and trade tensions, which hit the in China last year and may happen again this year," said Zhang,

 

 

First Published: Mon, January 14 2019. 13:03 IST