The world’s largest automotive market continues to face headwinds as auto sales in China dropped for the fifth consecutive month.
The Chinese economy was already experiencing a long-term slowdown, including auto sales, when the tariff fight between the U.S. and China began.
Sales of SUVs, sedans and minivans in China fell 16% from a year ago to just under 2.2 million units, the China Association of Automobile Manufacturers, reported Tuesday. Through November, sales were down 2.8% from a year earlier at 21.5 million, putting 2018 sales on track to shrink for the first time in three decades.
The decline comes a difficult time for automakers that are accustomed to seeing China as a booming market, particularly now for electric vehicles. New mandates issued by the Chinese government have cleared the way for U.S. automakers to invest in China, including plans to build plants dedicated to manufacturing electric vehicles.
(Tesla hustling to build a new plant in China. Click Here for the story.)
Overall, China’s economy is forecast to grow by about 6.5% this year, down slightly from 2017′s 6.7%, Associated Press reported. However, some of that is supported by government programs, such as public works construction projects that offset a decline in real estate sales.
The auto sector hasn’t received that kind of fervent support and the numbers reflect that as November’s sales decline was worse than October’s 13% contraction, which was sharper than September’s 12% decline.
(Click Here for more about Trump backing off tariff deal claims.)
The sales drop isn’t entirely unexpected as the government tightened lending rules last year to slow down booming sales that threatened to overheat. However, the correction may have worked too well and now the government will need to take new steps, such as cutting sales taxes, to jump start sales, AP reported.
Unlike in the U.S. where utility and truck sales have been strong, there are no sacred cows tied to the Chinese market — SUV sales are down 16% from a year earlier in November to 910,000 vehicles. Year-to-date sales were basically flat at 9 million units. Sedan sales fell 12% to just under 1.1 million units.
(To see more about how China is causing Volvo to slow its ramp up of S60 production, Click Here.)
The bright spot in China sales unsurprisingly are hybrid and battery-electric vehicles. Beijing has been pushing incentives to attract more buyers, and it’s working with sales up 37.6% to 169,000 in November. Year-to-date sales were up 68% at just over 1 million.