Hyundai-Kia lead drop in China auto sales

[BEIJING] Hyundai and Kia extended their sales decline in China last month as consumers shunned Korean brands due to geopolitical tensions, while Great Wall Motor posted its first monthly drop in more than two years as competition intensifies in the market's fastest-growing vehicle segment.

Retail sales of cars, sport utility vehicles and multipurpose vehicles fell 1.7 per cent to 1.69 million units in April, data released by China Passenger Car Association on Tuesday show. For the first four months, deliveries slid 1.4 per cent to 7.27 million units.

Automakers now face the prospect of slowing sales in the world's two largest vehicle markets, as rising incentives fail to boost demand in the US and now China. While higher borrowing costs and larger down payments are weighing on American car buyers, the slowdown in China is due in part to politics, said industry consultant Maryann Keller. Chinese consumers are turning away from Korean-branded cars, which accounted for about 5 per cent of the market, as part of a consumer backlash against the country's decision to host the US missile-defense system known as Thaad.

"The Thaad event keeps simmering and slowing the recovery of the market, which was unexpected," Wu Zeqin, an analyst with Ways Consulting Co. wrote in a note this month. "Patriotic consumers who shun Korean brands are either turning to other brands or postponing their purchases."

The fallout could last as long as a year despite possible efforts by the newly elected South Korean president to repair ties with China, said Steve Man, an analyst at Bloomberg Intelligence. A territorial dispute over a group of islands in 2012 between China and Japan resulted in a yearlong decline in sales of Japanese automakers, which lost about 5.5 percentage points in market share during the period, said Mr Man.

Japanese and Chinese car brands are gaining at the expense of Korean marques, with Nissan Motor Co and Geely Automobile Holdings Ltd posting better-than-industry gains. Kia Motors Corp's China sales fell more than 60 per cent to 16,050 units in April, according to a spokesman for its local joint venture.

BLOOMBERG