AUTO CORRECTION

Sales in China, the world’s largest car market, fell for the first time in 20 years.

BEIJING/SHANGHAI: Carmakers in China will face more fierce competition this year, after a tough 2018 when the world’s biggest auto market contracted for the first time in more than two decades, the country’s top auto industry association said on Monday. Companies such as homegrown Geely and Britain’s biggest automaker Jaguar Land Rover have already in recent days flagged caution about China sales in 2019, hit also by Beijing’s trade war with the United States. China car sales fell 13% in December, the sixth straight month of declines, bringing annual sales to 28.1 million, down 2.8% from a year earlier, China’s Association of Automobile Manufacturers (CAAM) said. That was against a 3% annual growth forecast set at the start of 2018 and is the first time China’s auto market has contracted since the 1990s. “China’s car market still faces relatively large pressures in the short term,” senior CAAM official Shi Jianhua said at a briefing, attributing the weak 2018 sales to the phasing out of purchase tax cuts on smaller cars and the Sino-US trade war. CAAM expects the weakness to persist and has forecast flat sales of 28.1 million vehicles for 2019, while other government and industry bodies see a 0-2% growth. Ford was the worst performer among global carmakers in China last year, with its sales shrinking 37%. Geely, China’s most successful carmaker, sold 20% more cars in 2018, but this was sharply lower than a 63% growth in 2017. It is forecasting flat sales this year. Toyota, however, bucked the trend, with a 14.3% rise in sales in China, versus 6% growth in 2017, helped by better demand for its luxury brand Lexus and improved marketing efforts. The bleak numbers add to worries for investors, already spooked by signs of a broader drop in demand from the world’s No. 2 economy, especially after Apple’s rare revenue warning citing weak iPhone sales in the country. Analysts are, however, counting on measures promised by China to buoy spending as well as rising demand for new energy vehicles (NEVs) to bring some relief. NEV sales jumped 61.7% in 2018 to 1.3 million units, CAAM said. It sees NEV sales hitting 1.6 million this year. China’s state planner has said it will introduce policies to lift domestic spending on items such as autos, without providing specifics. Beijing has also made changes to the income tax threshold to hike incomes and personal spending power. This could help resolve the industry’s current issues of unsold inventory, drive sales growth and provide relief to the economic pressures China is facing, said Patrick Yuan, Hong Kong-based analyst at Jefferies. “With that, car sales growth could recover to as high as 7% this year,’’ he said. According to Alan Kang, an LMC Automotive analyst, demand could also draw support as consumers stop putting their buying decisions on hold in hopes Beijing will reintroduce purchase tax cuts on smaller cars. “As their hopes for tax cuts evaporate in 2019, these consumers will trickle back in,’’ he added. However, some analysts struck a sombre note amid forecasts China’s economy would slow further this year. Data this month is expected to show the economy grew around 6.6% in 2018 — the weakest since 1990. “We should notice the big uncertainties among macro economy and trade tensions, which hit the auto market in China last year and may happen again this year,” said Yale Zhang, head of consultancy AutoForesight.