Auto sales in China decline for a 14th consecutive month in August

Auto sales in China fell for a 14th consecutive month in August, and the number of new energy vehicles (NEVs) sold contracted for the second month in a row, data from the country’s biggest auto industry association showed.

Total auto sales fell 6.9% from the same month a year earlier to 1.96 million, the China Association of Automobile Manufacturers (CAAM) said on Wednesday.

That followed declines of 4.3% in July and 9.6% in June, as well as the first annual contraction last year since the 1990s against a backdrop of slowing economic growth and a crippling trade war with the United States.

Sales of new energy vehicles fell 15.8% in August, CAAM said, following a 4.7% fall in July - their first decline since January 2017. NEV sales jumped almost 62% last year even as the broader auto market contracted.

NEVs include plug-in hybrids, battery-only electric vehicles and those powered by hydrogen fuel cells. China has been a keen supporter of NEVs and has brought in sales quota requirements for automakers.

“Due to the impact of subsidies cut on new energy vehicles, sales for new energy vehicles continued to drop,” Chen Shihua, assistant secretary general at CAAM, said.

CAAM said in July it expected auto sales to fall 5% year-on-year to 26.68 million vehicles in 2019.

It still expects sales of new energy vehicles to increase, but at a slower pace to 1.5 million, down from a previous forecast of 1.6 million.

China has been trying since January to boost consumption of a range of goods as the world’s second-biggest economy slows further amid a trade spat with the United States characterised by tit-for-tat import tariffs.

“We expect these measures will promote the consumption of autos in China,” Chen said.

The implementation of new vehicle emission standards earlier than the central government’s 2020 deadline by 15 cities and provinces, which account for over 60% of car sales in China, spooked buyers too and hurt sales - particularly of traditional-fuel vehicles - according to CAAM, analysts, dealers and consumers.

The prolonged sales decline has made local carmakers such as Geely Automobile Holdings Ltd and Great Wall Motor Co Ltd cut expectations for sales and profit.

The decline has also prompted some global names including Peugeot SA to close plants and adjust workforce. China is also re-instituting an additional 25% tariff on US-made vehicles and 5% tariffs on auto parts that had been suspended at the beginning of the year. Carmakers such as Daimler and Tesla had adjusted their prices in China when the auto and auto parts tariffs were suspended.

Meanwhile, China’s Great Wall Motor may consider building car manufacturing facilities in the European Union once its sales there hit 50,000 units a year, its chairman said, as part of a push to seek growth in overseas markets.

Great Wall, the top sport-utility vehicle and pickup truck maker in China, is now exploring sales and production in overseas markets to expand its global influence and seek higher profit, as growth in the world’s largest auto market slows.

The company plans to start selling WEY-branded SUVs to the European Union in two years, Chairman Wei Jianjun told Reuters in an interview on the sidelines of the Frankfurt auto show, referring to its more premium brand.

“We plan to produce cars from China and export to the EU in the early stage,” Wei said, adding the company also plans to sell battery electric and plug-in hybrid vehicles to Europe.

“We believe once we sell more than 50,000 units in the EU, we will begin to consider building a factory there,” Wei said. Asked if Great Wall might acquire a foreign brand, he said it did not need a new brand to enter new markets.

Great Wall, whose mass-market brand is Haval, also exports some pickup truck models to Italy, its website shows. In June, Great Wall started production at a plant in the Tula region of central Russia with a manufacturing capacity of 80,000 cars a year.

Great Wall is not the only Chinese carmaker to plan car production in Europe. Geely has manufacturing facilities for Volvo cars in Sweden and Belgium and also has plants in Belarus for its own Geely brand. The Baoding-based carmaker previously expressed interest in entering the United States market, but the plan has been postponed due to the trade tension between the world’s largest two economies.

Great Wall is one of the few car companies to report sales growth this year in China, which is enduring a prolonged auto sales slowdown. The firm sold 624,000 units in the first eight months this year, 5.79% higher than the figure in the same period last year.

Reuters