China auto sales fall as turnaround hopes fade

Auto sales in China fell for a 15th consecutive month in September, data from its biggest auto industry association showed, dampening hopes for a second-half turnaround in the world’s largest auto market.

Total auto sales fell 5.2 per cent from the same month a year earlier to 2.27 million vehicles, the China Association of Automobile Manufacturers (CAAM) said on Monday.

This followed declines of 6.9 per cent in August and 4.3 per cent in July. Car sales in 2018 declined from a year earlier, the first annual contraction since the 1990s against a backdrop of slowing economic growth and a crippling trade war with the United States.

September and October, known as “Golden September, Silver October” by China’s auto insiders, are regarded as the high season for sales, with customers traditionally returning to make purchases after the summer.

The association had previously said it expected sales in the second half to improve, but that overall annual sales would fall 5 per cent year-on-year to 26.68 million vehicles in 2019.

“Sales have risen in the second half but they have not hit expectations and the pace has been slow,” said Chen Shihua, CAAM assistant secretary-general.

“Competition has become fiercer,” said senior CAAM official Xu Haidong, adding that independent Chinese brands, rather than joint venture ones, were bearing the brunt of the sales slide.

“It’s become the survival of the fittest.”

As recently as three years ago, automakers had enjoyed double-digit annual growth in China.

Fifteen cities and provinces, which account for more than 60 per cent of car sales in China, implemented new vehicle emission standards earlier than the central government’s 2020 deadline, damaging sales of traditional-fuel vehicles in particular, according to CAAM, analysts, dealers and consumers.

Sales of new energy vehicles (NEV), which China has been a keen supporter of, have also been impacted by subsidy cuts, falling 34.2 per cent in September following a 15.8 per cent decline in August, CAAM said. NEV sales had jumped almost 62 per cent last year as the broader auto market contracted.

NEVs include plug-in hybrids, battery-only electric vehicles and those powered by hydrogen fuel cells. CAAM has said it expects sales of new energy vehicles to increase this year, but at a slower pace to 1.5 million, down from a previous forecast of 1.6 million.

The impact of the subsidy cuts on the NEV sector was set to linger, Chen said. “I feel that there will be difficulties in reaching the target in the following three months,” he said.

General Motors’ July to September vehicle sales in China fell 17.5 per cent, as the US automaker was hurt by a slowing economy amid the Sino-US trade war and by heightened competition in its key mid-priced SUV segment.

General Motors (GM) delivered 689,531 vehicles in China in the third quarter this year, according to a company statement. The drop for the quarter ended September 30 marks the fifth straight quarterly sales decline for GM in China, the world’s biggest auto market.

It delivered 2.26 million vehicles in the first nine months this year, according to Reuters calculation.

As GM and Ford Motor’s China sales extend declines, US car companies’ share of total China passenger vehicles sales fell to 9.5 per cent in the first eight months of this year from 10.7 per cent in the year-ago period, according to the China Association of Automobile Manufacturers (CAAM).

Over the same period, German car makers’ share has risen to 23.8 per cent from 21.6 per cent and Japanese auto makers’ to 21.7 per cent from 18.3 per cent.

In China, GM has a joint venture with SAIC Motor Corp, in which the Buick, Chevrolet and Cadillac are made. It also has another venture, with SAIC and Guangxi Automobile Group, in which they make no-frills minivans and have started to make higher-end cars. GM, the second biggest international automaker in China by sales, sold 3.64 million units in China last year, down from 4.04 units in 2017.

Sales of GM’s affordable brand Baojun dropped 34.9 per cent for the latest quarter, while sales of the mass-market Buick fell 20.6 per cent. But luxury brand Cadillac’s sales jumped 10.9 per cent. Annual industry car sales in China fell last year for the first time since the 1990s, and they are expected to fall this year too. Sales dropped 6.9 per cent in August from the same month a year prior, CAAM said. An official at the association said last month that in the next three years the industry could see “low or small negative growth”.

Reuters