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China car sales at worst-ever monthly low as trade war heats up

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A key reason for the drop in car sales is provinces implementing vehicle emission standards earlier than the central government’s 2020 deadline, stoking uncertainty among manufacturers.

Beijing

CHINA reported the worst-ever monthly sales drop in the world's largest vehicle market on Wednesday, exacerbating concerns over the country's economic slowdown and growing impact of an ongoing trade war with the United States.

Sales tumbled 16.4 per cent in May from the same month a year prior, the China Association of Automobile Manufacturers (CAAM) said.

That marked the 11th consecutive month of decline and followed falls of 14.6 per cent in April and 5.2 per cent in March.

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Xu Haidong, CAAM's assistant secretary general, said that one key reason for the drop was provinces implementing "China VI" vehicle emission standards earlier than the central government's 2020 deadline, stoking uncertainty among manufacturers.

"We gave the manufacturers too little time to prepare," he said, adding that the industry's supply chain was finding it difficult to keep up with market changes.

Car sales in China contracted for the first time last year since the 1990s as a slowing economy and tit-for-tat import tariffs between Beijing and Washington affected consumer sentiment.

Industry executives have said they believe that the market will return to growth in the second half of this year due to government support.

On Wednesday, Mr Xu said that May demand also suffered from a decline in purchasing power in the low-to-middle income groups as well as expectations of government stimulus to encourage purchases.

Earlier in June, the government announced measures to revive sales, including stopping local authorities from imposing new restrictions on purchases and eliminating restrictions on new energy vehicles (NEVs).

Contrary to market expectations, the measures did not include the relaxation of controls over the issuance of licences for petrol-powered cars in major cities.

Mr Xu also noted that the measures did not include subsidies, but said that it was unrealistic to continue expecting such support.

"This is a perfectly competitive industry and doesn't need the government to intervene day in and out," said Shi Jianhua, a senior CAAM official.

Growth in the NEV segment, usually a bright spot for the sector, also slowed sharply in May. Sales grew just 1.8 per cent versus 18.1 per cent in April.

For all of last year, NEV sales jumped almost 62 per cent even though the broader market shrank.

NEVs include petrol-electric hybrid vehicles, plug-in hybrids, battery-only electric vehicles and hydrogen fuel cell vehicles.

China, blighted by air pollution, has been a keen supporter of NEVs, requiring carmakers to meet sales quotas.

Mr Xu said that NEV growth had been dragged down by a fall in sales of commercial vehicles such as buses, and that sharp discounting on traditional petrol-powered cars - prompted by increasingly stringent emission standards - had also lured buyers away from NEVs.

In May, most carmakers reported a decline in China sales, except Japan's Toyota Motor Corp and Honda Motor Co Ltd which logged double-digit growth. REUTERS