Car industry cautious as China starts 2020 with 2% sales decline forecast

Beijing

CHINA'S car market is likely to shrink for the third consecutive year in 2020, the country's top auto body said on Monday, with industry watchers hoping a sales recovery in lower-tier cities will help ease the pace of decline.

The China Association of Automobile Manufacturers (CAAM) expects a 2 per cent fall in vehicle sales. That would compare with 8.2 per cent last year when sales were pressured by new emission standards in a shrinking economy that was contending with tit-for-tat import tariffs with the United States.

CAAM, affirming its forecast announced last month, also said car sales declined for the 18th consecutive month in December. Annual sales started falling in 2018, by 2.8 per cent, halting a growth march that started in the 1990s.

"The negative effect of cutting purchase tax in 2015-2017 has disappeared, and car sales in lower-tier cities are expected to recover," said Alan Kang, a senior analyst at LMC Automotive.

"The easing of trade tensions between China and the United States has also helped restore consumer confidence," said Mr Kang, who expects China car sales to grow 0.05 per cent this year.

Sales of new energy vehicles (NEV) sank 27.4 per cent in December, resulting in an overall 4 per cent decline in 2019. China's NEV sales jumped 62 per cent in 2018 but a subsidy cut hurt sales last year.

Global carmakers have been cautious with their predictions after cutting production, shutting factories and firing staff last year.

Executives at carmakers such as Geely and Ford Motor Co partner Chongqing Changan Automobile Co Ltd have said they expect fiercer competition to weed out weaker players.

On Monday, Ford said its China car sales slumped more than a quarter in 2019 for its third year of decline. The latest fall, however, was slower than the 37 per cent weathered in 2018, and the carmaker said it saw its market share stabilise in the high-to-premium segment.

It remained cautious about 2020, echoing bearish comments on China's market from General Motors Co.

"We expect the market downturn to continue in 2020, and anticipate ongoing headwinds in our China business," Matt Tsien, president of GM China, said last week as the US carmaker reported a 15 per cent drop in 2019 China sales. REUTERS