China auto market likely to have its worst year in 2019

Predictions of zero growth are lowest in 3 decades

China’s auto market will continue to see sluggish sales in 2019, with zero growth predicted for the first time in three decades, and carmakers should get prepared for the downturn that will be complicated by lower tariffs on imported vehicles, industry representatives said.

The sales volume of passenger cars in the Chinese market is expected to reach 23.6 million units in 2019, the same number that were sold in 2018, the China Association of Automobile Manufacturers (CAAM) said at an industry meeting in Changsha, Central China’s Hunan Province, on Friday.

Overall auto sales in 2019 will reach 28 million units, which would match the volume of 2018.

“This is the first time in almost 30 years that China’s auto market will see zero growth,” Jia Xinguang, executive director at the China Automobile Dealers Association, told the Global Times on Friday. “In November, domestic auto sales dropped for the fifth month in a row and this downturn will continue in 2019, but not many automakers are well prepared for it,” he said.

China’s auto sales declined 14 percent year-on-year to 2.55 million units in November, according to data released by CAAM on Tuesday.

Sales have been trending downward since July, data from the CAAM shows.

Slowing economic growth, a lack of consumption incentives and tightened car buying restrictions have hindered the growth of the domestic auto market, industry representatives noted.

“2019 might be even more difficult for automakers. CAAM has not come up with the worst scenario yet. Overall auto sales may see annual declines next year,” Mei Songlin, vice president and managing director of China operations at JD Power, told the Global Times on Friday.

Although China has agreed to lower tariffs on imported vehicles, as part of its efforts to further open up its market to foreign companies, the volume of imported cars is still very limited, and foreign car dealers should also prepare for a tepid market, Mei noted.

China has already lowered the 20-to-25-percent tariffs on imported cars to 15 percent, the Xinhua News Agency reported in July. To ease China-US trade tensions, China announced on Friday it will temporarily stop imposing 25 percent and 5 percent tariffs on US-made cars and components for three months starting from January 1, 2019.

“Those moves may unleash some momentum for the auto market, which could help boost overall sales volume,” Mei added.

China’s auto market still has room to grow, as vehicle ownership per capita was 131 units in 2016, far behind other countries such as the US and Japan, where the vehicle ownership per capita was 834 and 611, industry consultancy chyxx.com said in a report released in January. Purchase restrictions in China peg the peak ownership ratio at 400 units.