China Car Sales Drop Accelerates on Slowing Economy, Trade War

(Bloomberg) -- Chinese car sales slumped for a second consecutive month as a slowing economy and a tit-for-tat trade war with the U.S. kept consumers away from showrooms.

Retail sales of cars, SUVs and multipurpose vehicles fell 5.4 percent to 1.6 million units in July, the China Passenger Car Association said Wednesday. That compares with a 3.7 percent drop in June and trimmed the year-to-date growth in the world’s biggest automobile market to 2 percent.

China’s economy is showing signs of weakness as a weakening yuan and a slump in stocks cost the country its rank as the world’s second-biggest equity market. While Japanese automakers such as Toyota Motor Corp. and Nissan Motor Co. are boosting sales in China, U.S. automakers are under pressure because of the trade friction between the world’s top two economies, according to Steve Man, a senior car analyst for Bloomberg Intelligence in Hong Kong.

External factors such as trade friction with the U.S. has had a big impact on consumer confidence, the passenger car association said in a statement. Some U.S. brands are seeing a large drop in sales because of consumer attitude, it said.

Toyota, Nissan

Chinese, Japanese and Korean car brands gained last month as they roll out more competitive models to cater to local consumer demand. Geely Automobile Holdings Ltd., part of the Geely Group that owns stakes in Daimler AG and Volvo Cars, posted 32 percent increase in July.

Nissan Motor Co., which is nearing a decision to build a new plant, had a 2 percent gain, while Toyota, Asia’s biggest carmaker, had a 17 percent jump.

The U.S. on July 6 imposed a 25 percent duty on $34 billion of Chinese imports, triggering what China called “the largest trade war in economic history.” China hit back immediately via duties on U.S. shipments including soybeans and automobiles.

U.S. carmakers are increasing their push to find new buyers in China. Ford Motor Co., which has been struggling in the country, said it’s launching a new SUV targeting emerging cities in the country.

The mid-size SUV named Territory was developed with Ford’s joint venture partner, Jiangling Motors Corp., Ford said Wednesday. The model goes on sale early next year. In the coming months, Ford will also launch new versions of the Focus and Escort cars.

Last month, the automaker said the deterioration of its business in China was “swift,” and serious shortfalls included inadequate dealer profitability, according to Jim Farley, president of Ford’s global markets.

To contact Bloomberg News staff for this story: Yan Zhang in Beijing at yzhang1044@bloomberg.net

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With assistance from Editorial Board