China’s car industry hitting the skids

By David McMullan

Car sales in China fell for the 9th successive month in February, dragging automakers deeper into a fall that's threatening their long-standing development plans in the world's largest market.

Trade sales of sports cars, sport utility vehicles, multipurpose cars and minivans fell 18.5 per cent to 1.19 million in February. This follows a 4 per cent decline in January and the first annual drop in more than 20 years.

The worst car-market collapse in a generation has provoked dealers and manufacturers to resort to substantial discounts and inexpensive loans, yet customers are still in a wait-and-see mode ahead of possible government inducements aimed at stimulating the market, especially in country areas. Administrators are forecasting that the slump will spell the end for the worst-performing producers as the industry containing dozens of manufacturers prepares for reorganization.

"Customers are waiting for the other shoe to drop before they make purchase decisions," Cui Dongshu, secretary general of the PCA, told reporters in a meeting last month. "The longer it takes for governments to take real action, the worse the car sales will look like."

Ford Motor Co and Hyundai Motor Co are among automakers counting on an enhancement in China to revive the earnings that were hit by a slowing economy and trade tensions. Even as the electric-car demand rises, the vehicle market as a whole is showing no signs of recovery.

"The Chinese government won't let the car market continuously show negative growth," said John Zeng, managing director of researcher LMC Automotive Shanghai. "We expect the market to return to growth in the second half of this year if the trade war with US doesn't deteriorate."

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