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Carmakers get no relief in China as sales keep plunging

Beijing

CHINA'S car sales fell for the ninth consecutive month in February, pulling carmakers deeper into a slump that's threatening their long-term growth plans in the world's largest market.

Retail sales of sedans, sport utility vehicles, multipurpose vehicles and minivans fell 18.5 per cent to 1.19 million units last month, the China Passenger Car Association said on Friday. That follows a 4 per cent decline in January and the first annual drop in more than two decades.

The worst car-market slump in a generation has prompted dealers and manufacturers to resort to generous discounts and cheap loans, yet consumers are still in a wait-and-see mode ahead of potential government incentives aimed at reviving the market, especially in rural areas. Executives are predicting that the gloom will spell the end for the worst-performing manufacturers as the industry consisting of hundreds of manufacturers prepares for a reshuffle.

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"Customers are waiting for the other shoe to drop before they make purchase decisions," Cui Dongshu, secretary general of the PCA, told reporters in a meeting last month. "The longer it takes for governments to take real action, the worse the car sales will look like."

Ford Motor Co and Hyundai Motor Co are among carmakers counting on an improvement in China to revive earnings hit by a slowing economy and trade tensions. Even as electric-car demand rises, the vehicle market as a whole is showing no signs of recovery.

"The Chinese government won't let the car market continuously show negative growth," said John Zeng, managing director of researcher LMC Automotive Shanghai. "We expect the market to return to growth in the second half of this year if the trade war with US doesn't deteriorate." BLOOMBERG