Auto sales post biggest drop in 7 years as growth engine stalls
China's car sales fell the most in nearly seven years in September, stoking concerns the world's biggest auto market could contract for the first time in decades this year amid cooling economic growth and a biting trade war.
Vehicle sales slumped 12 percent to 2.39 million units last month, the third straight decline, the China Association of Automobile Manufacturers said Friday. It cited a sluggish economy, deleveraging and a tough pollution crackdown as reasons for the steep fall.
A decline in China's giant auto industry will be a concern for the country's leaders in Beijing. It is an important barometer of Chinese consumers' willingness to open their purse strings.
"The automotive industry has been a driver of China's economic growth for years. Now it is pulling back," Xu Haidong, CAAM assistant secretary general, said at a briefing in Beijing.
China's top auto industry trade group said its already weak forecast for full-year growth would be missed, though the market should avoid a sales decline. Analysts have predicted the market could contract this year for the first time since at least the early 1990s.
The downtrend in sales underscores how international carmakers, from General Motors to Toyota Motor Corp., face headwinds when they are increasingly looking toward China as a driver of growth.
It also exemplifies the impact of the U.S.-China trade war, with light vehicles among the sectors hardest hit by tariffs. CAAM said last month sales were impacted by a sluggish economy and unfavorable effects of the trade war.
China's economic malaise has seen domestic stock markets plunge and the country's factory sector stall last month after over a year of expansion. The International Monetary Fund also cut its forecast for growth in China's economy next year to 6.2 percent from 6.4 percent.
Beijing, concerned about the slowdown, has already opened the taps to boost liquidity in the market.
The slide in September auto sales follows a 3.8 percent fall in August and a 4.0 percent drop in July. Vehicle sales increased 4.8 percent in June.
September's decline was the most since a 26 percent drop in January 2012, which was in part because of the timing of the China New Year holiday that year.
Sales in the first nine months of the year totaled 20.49 million vehicles, a gain of 1.5 percent from the same period a year earlier.
CAAM's Xu said the group's target for 2018 sales growth -- 3 percent -- would be missed. Sales rose 3 percent last year, but the gain was down sharply from a 14 percent increase in 2016.
Amid the slowdown, an army of Chinese car dealers is feeling the squeeze and is pushing for government support to revitalize growth.
Yale Zhang, head of Shanghai consultancy Automotive Foresight, said that if sales shrink this year it would be a "watershed moment" for the industry.
"It's very alarming and is even causing panic among some automakers and suppliers. That's because the market has been growing nonstop every year for more than 20 years, and those companies make plans based on growth," he said.
"They don't know what to do and worry about survival."
Winners, losers
GM, one of the most successful global carmakers in China for decades, said third-quarter sales fell 15 percent from a year earlier. German carmaker Volkswagen Group said that China sales dropped 11 percent last month.
Ford Motor Co, which has been struggling to turn around falling sales in the market, said on Friday that September sales in China plunged 43 percent.
China's broader economic woes have led to a particular slowdown in the demand for cars in smaller, lower-tier cities across China, some car makers have said, which until now were the engine of growth for the country's auto industry.
Zhang of Automotive Foresight said that several factors had combined to cause this, including high gasoline prices this year that had stymied growth in lower-tier cities.
The industry is also facing a shake-up as decades-old rules change to allow foreign car makers to own majority stakes in local joint ventures. Luxury German car maker BMW said on Thursday it would take control of its main China venture in a $4.2 billion deal.
The changing auto landscape is throwing up distinct winners and losers in the market, a major shift from the golden years of growth where most players were guaranteed decent returns.
Among those struggling in China the most are Peugeot , Hyundai Motor and its sibling brand, Kia Motors, Ford and Japanese car maker Honda Motor Co.
Sales of new-energy vehicles -- a category comprising electric battery cars and plug-in electric hybrid vehicles -- remained strong, rising 55 percent in September, slightly faster than a month earlier.
That boosted new-energy vehicle sales in the first nine months of this year to 721,000 vehicles, a gain of 81 percent from the same period a year earlier.
A decline in China's giant auto industry will be a concern for the country's leaders in Beijing. It is an important barometer of Chinese consumers' willingness to open their purse strings.
"The automotive industry has been a driver of China's economic growth for years. Now it is pulling back," Xu Haidong, CAAM assistant secretary general, said at a briefing in Beijing.
China's top auto industry trade group said its already weak forecast for full-year growth would be missed, though the market should avoid a sales decline. Analysts have predicted the market could contract this year for the first time since at least the early 1990s.
The downtrend in sales underscores how international carmakers, from General Motors to Toyota Motor Corp., face headwinds when they are increasingly looking toward China as a driver of growth.
It also exemplifies the impact of the U.S.-China trade war, with light vehicles among the sectors hardest hit by tariffs. CAAM said last month sales were impacted by a sluggish economy and unfavorable effects of the trade war.
China's economic malaise has seen domestic stock markets plunge and the country's factory sector stall last month after over a year of expansion. The International Monetary Fund also cut its forecast for growth in China's economy next year to 6.2 percent from 6.4 percent.
Beijing, concerned about the slowdown, has already opened the taps to boost liquidity in the market.
The slide in September auto sales follows a 3.8 percent fall in August and a 4.0 percent drop in July. Vehicle sales increased 4.8 percent in June.
September's decline was the most since a 26 percent drop in January 2012, which was in part because of the timing of the China New Year holiday that year.
Sales in the first nine months of the year totaled 20.49 million vehicles, a gain of 1.5 percent from the same period a year earlier.
CAAM's Xu said the group's target for 2018 sales growth -- 3 percent -- would be missed. Sales rose 3 percent last year, but the gain was down sharply from a 14 percent increase in 2016.
Amid the slowdown, an army of Chinese car dealers is feeling the squeeze and is pushing for government support to revitalize growth.
Yale Zhang, head of Shanghai consultancy Automotive Foresight, said that if sales shrink this year it would be a "watershed moment" for the industry.
"It's very alarming and is even causing panic among some automakers and suppliers. That's because the market has been growing nonstop every year for more than 20 years, and those companies make plans based on growth," he said.
"They don't know what to do and worry about survival."
Winners, losers
GM, one of the most successful global carmakers in China for decades, said third-quarter sales fell 15 percent from a year earlier. German carmaker Volkswagen Group said that China sales dropped 11 percent last month.
Ford Motor Co, which has been struggling to turn around falling sales in the market, said on Friday that September sales in China plunged 43 percent.
China's broader economic woes have led to a particular slowdown in the demand for cars in smaller, lower-tier cities across China, some car makers have said, which until now were the engine of growth for the country's auto industry.
Zhang of Automotive Foresight said that several factors had combined to cause this, including high gasoline prices this year that had stymied growth in lower-tier cities.
The industry is also facing a shake-up as decades-old rules change to allow foreign car makers to own majority stakes in local joint ventures. Luxury German car maker BMW said on Thursday it would take control of its main China venture in a $4.2 billion deal.
The changing auto landscape is throwing up distinct winners and losers in the market, a major shift from the golden years of growth where most players were guaranteed decent returns.
Among those struggling in China the most are Peugeot , Hyundai Motor and its sibling brand, Kia Motors, Ford and Japanese car maker Honda Motor Co.
Sales of new-energy vehicles -- a category comprising electric battery cars and plug-in electric hybrid vehicles -- remained strong, rising 55 percent in September, slightly faster than a month earlier.
That boosted new-energy vehicle sales in the first nine months of this year to 721,000 vehicles, a gain of 81 percent from the same period a year earlier.
