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China Car Market’s Historic Rut Far From Over

Auto sales in China decline for the 13th time in the past 14 months.

China Car Market’s Historic Rut Far From Over
A customer speaks with a sales agent while standing between a Ford Motor Co. Everest sport utility vehicle (SUV), right, and a Mustang sports car on display at a Ford dealership in Shanghai, China. (Photographer: Qilai Shen/Bloomberg)

(Bloomberg) -- Chinese auto sales returned to a downward trajectory last month after a brief uptick, showing the market’s historic rut is far from over.

Retail sales of sedans, sport utility vehicles, minivans and multipurpose vehicles in July fell 5.3% from a year earlier to 1.51 million units, according to the China Passenger Car Association. That’s the 13th decline in the past 14 months.

China Car Market’s Historic Rut Far From Over

The figures show that the increase seen in June was just a blip caused by dealers offering heavy discounts to clear inventory. Rising trade tensions, a slowing economy and stricter emission rules have left carmakers and dealerships mired in the market’s most prolonged slump in a generation. Researcher LMC Automotive is estimating a second straight annual drop for the world’s biggest car market.

The unprecedented slide has hit local companies particularly hard, with Geely Automobile Holdings Ltd. and BYD Co. among those reporting sales declines. However, European luxury manufacturers BMW AG and Daimler AG as well as Honda Motor Co. and Toyota Motor Corp. have continued to boost sales this year. Ford Motor Co. and General Motors Co.’s premium brands have been bright spots.

For decades, carmakers have relied on China for growth, pouring billions of dollars in the country for new plants and dealership networks. Now the slump risks weighing on some future investment decision of both Chinese and global carmakers.

BMW’s joint venture to make electric Minis in China is facing some uncertainties, according to Chinese partner Great Wall Motor Co., potentially clouding the luxury-car maker’s plans. Dongfeng Motor Corp. is exploring options for its $2.5 billion stake in Peugeot owner PSA Group including a potential divestment, people with knowledge of the matter have said. Suzuki Motor Corp. pulled out of China last year.

Still, the industry sales numbers may begin to show improvement as year-earlier comparisons become easier. In August, the PCA expects the market to be little changed, helped by new models, Secretary General Cui Dongshu told reporters in Beijing.

To contact Bloomberg News staff for this story: Wendy Hu in Beijing at whu109@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Ville Heiskanen

©2019 Bloomberg L.P.

With assistance from Bloomberg