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Chinese auto sales post worst-ever monthly decline as trade war intensifies

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06/12/2019 | 04:25am EDT
FILE PHOTO: Carrier trailer transports newly manufactured cars at a port in Dalian

BEIJING/SHANGHAI (Reuters) - 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% 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% in April and 5.2% in March.

Xu Haidong, CAAM's assistant secretary general, said 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.

Automotive 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 the market will return to growth in the second half of this year due to government support.

On Wednesday, Xu said 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 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.

Xu also noted that the measures did not include subsidies, but said 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.

SHARP SLOWDOWN

Growth in the new energy vehicle segment, usually a bright spot for the sector, also slowed sharply in May. Sales grew just 1.8% versus 18.1% in April. For all of last year, NEV sales jumped almost 62% 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 automakers to meet sales quotas.

Xu said NEV growth had been dragged down by a fall in sales of commercial vehicles like 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 automakers reported a decline in China sales, except Japan's Toyota Motor Corp and Honda Motor Co Ltd which logged double-digit growth.

(Reporting by Beijing Newsroom, Yilei Sun and Brenda Goh; Editing by Christopher Cushing)

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