World's largest car market reports second straight annual decline | Auto Finance News | Auto Finance News

World’s largest car market reports second straight annual decline

Car sales in China continued to fall in December, capping a second straight annual drop, though a slowing pace of declines suggests the world’s biggest market may be close to a bottom.

Sales of sedans, sport utility vehicles, minivans and multipurpose vehicles fell 3.6% last month from a year earlier to 2.17 million units, the China Passenger Car Association said Thursday. The drop was the 18th in the past 19 months, with the only gain coming last June when dealers offered large discounts to clear inventory.

Carmakers and dealerships are struggling as a slowing economy and tariff uncertainties caused by trade tensions keep consumers away from showrooms. General Motors Co. said Tuesday sales plunged 15% in China last year and warned pressure on its business will persist in 2020.

Yet the pace of declines has slowed for four consecutive months as year-on-year comparisons become easier. This year, the market probably won’t be hurt by factors such as regulatory changes that weighed on demand in 2019, Cui Dongshu, PCA’s secretary general, told reporters in Beijing. He predicted 1% growth for 2020 auto sales, excluding minivans.

Another industry body, the China Association of Automobile Manufacturers, last month forecast that vehicle sales will drop 2% in 2020 for the third straight annual decline. The 2019 full-year slide was 7.5%, compared with 6% in 2018, according to PCA.

Scaling Back

Global carmakers that have poured billions of dollars into China over the past decades are now reconsidering expansion plans. Peugeot maker PSA Group is selling its 50% stake in a joint venture making DS brand cars in China. Suzuki Motor Corp. pulled out of China in 2018.

Local manufacturers are also reeling, with BYD Co. posting a 11% drop in 2019 sales and SAIC Motor Corp. reporting a similar decline. Meanwhile, premium brands such as BMW, Audi and Porsche weathered the slump better as their customers were less affected by the economic slowdown.

At the same time, the global market has undergone one of its worst years ever with carmakers announcing plans to eliminate more than 80,000 jobs, according to data compiled by Bloomberg News. The industry is sputtering as trade tensions and tariffs raise costs and stifle investment, and as manufacturers reassess their staffing in an era of electrification, autonomous driving and ride-on-demand services.

Automakers in China are increasingly betting on electric vehicles for future growth. Tesla Inc. officially opened its multibillion-dollar Shanghai plant this week, and brands such as Mercedes-Benz and Volkswagen are also bringing out electric models.

Yet electric-vehicle demand has also sputtered since the government scaled back subsidies last year, leaving consumers assessing whether the higher prices for EVs are worth it. Wholesales of new-energy vehicles, including electric cars, fell 15% last month to 137,000 units, PCA said.

A majority of China’s EV purchases — about 70%, according to Sanford C. Bernstein — so far have been by the government and “policy-direct” customers, including taxis, mobility services and other state-affiliated fleet operators. Some local governments, including Shenzhen, require newly registered ride-hailing cars to be electric.

— Bloomberg News

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