China’s car market has been one of the most reliable engines of global growth for decades. Now that all might be coming to an end. Purchases of passenger vehicles by dealerships plunged for a third straight month, an industry group said Friday. With trade ties with the U.S. worsening by the day and car sales barely up for the year already, the industry is now facing the prospect of its first contraction since at least the 1990s.
A slowdown in China — where automakers poured in billions of dollars in the past 20 years to bulk up factories — leaves the industry struggling to find growth anywhere on the planet. A trade war with the U.S. has already prompted luxury-car makers BMW AG and Daimler AG to warn about lower profits while Chinese consumers staying away from showrooms forced Jaguar Land Rover to shut a factory temporarily.
Passenger-car purchases by dealerships declined 12 percent to 2.06 million units in September, the China Association of Automobile Manufacturers said. That leaves the market up just 0.6 percent for the first nine months of the year, and the association said fourth-quarter comparisons from 2017 are challenging. Still, CAAM stuck to its prediction that the market will show growth for the full year.
The slump may be the biggest auto manufacturers have ever experienced in China, the world’s largest car market, said Steve Man, a senior analyst at Bloomberg Intelligence in Hong Kong. Weaker brands may be hit disproportionately, and such companies will need to cut prices to drum up sales, Man said. Some carmakers may also be forced to shutter factories to reduce inventories and lower costs, he said.
China’s car dealers are now pushing the government to come up with fresh measures to help spur demand, including changes to the way value-added tax is levied on used cars.