Chinese Car Sales Suffer Record Drop, Set For Historic Collapse

Earlier this month we reported that one month after US carmakers slashed dealer and customer incentives, US auto sales plunged with most OEMs missing even the most pessimistic estimates. Now, the US auto malaise has appeared to the world's largest car market: China.

Looking at the latest Chinese auto sales car market, which has been one of the most reliable engines of global growth for decades, Bloomberg warns that all that "might be coming to an end".

The reason: dealership purchases of passenger vehicles plunged for a third straight month, the China Association of Automobile Manufacturers said on Friday. And with trade ties with the U.S. worsening by the day and car sales barely up for the year already, the industry is now facing the prospect of its first contraction on record.

The September data showed that passenger-car purchases by dealerships declined 12% from a year earlier to 2.06 million units in September, the biggest drop on record.

With the September drop, the market is now up just 0.6% for the first nine months of the year, and the CAAM association said fourth-quarter comparisons from 2017 are challenging, read a year over year decline is virtually assured even though CAAM stuck to its prediction that the market will show growth for the full year.

According to Bloomberg Intelligence analyst Steve Man, the slump may be the biggest that auto manufacturers have ever experienced in China. Similar to the US, weaker brands may be hit disproportionately, and the companies will need to cut prices to drum up sales, Man said. Some carmakers may also be forced to shutter factories to reduce inventories and lower costs.

Perversely, the slowdown comes at a time when global brands are making a bigger push into China, helped by the government opening up the economy. BMW on Thursday revealed a $4.1 billion deal to secure control of its Chinese joint venture, becoming first automaker to take advantage of China’s policy to let foreign companies own a majority holding of their local partnerships.

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Dan Richards 2 days ago Member's comment

On the one hand, China seems to be the "enemy" these days. So who cares? On the other hand, it sounds like it's US car manufacturers who will suffer as a result. Trade war or no trade war, it's interesting how interconnected the world economy is.