October 12, 2018 / 6:22 AM / a month ago

China vehicle sales fall for third straight month as slowdown bites

BEIJING, Oct 12 (Reuters) - China’s automobile sales fell 11.6 percent in September from a year earlier, the country’s top auto industry association said on Friday, marking the third straight month of declining sales in the world’s largest auto market.

The sales drop to 2.39 million vehicles, which comes amid slowing economic growth and a biting trade war between China and the United States, follows a 3.8 percent fall in August and a 4.0 percent drop in July. Vehicle sales increased 4.8 percent in June.

The China Association of Automobile Manufacturers (CAAM) said that overall sales for the first nine months of the year totalled 20.49 million vehicles, up 1.5 percent from the same period a year earlier. It did not give a reason for the drop but last month cited the impact a sluggish economy and the trade war are having on sales.

The slowdown is bad news for international car makers from General Motors to Toyota Motor, who are increasingly looking towards China as a driver of growth.

It is also a potential warning about the impact of the trade war on overall economic growth at the world’s second largest economy. Beijing has already opened the taps to boost liquidity in the market.

Amid the slowdown, an army of Chinese car dealers is feeling the squeeze and is pushing for government support to revitalise growth as concerns grow that the huge market could see its first annual sales decline in decades.

The industry is also facing a shake-up as decade-old rules change to allow foreign car makers to own majority stakes in local joint ventures. Luxury German car maker BMW said on Thursday it would take control of its main China venture in a $4.2 billion deal.

WINNERS AND LOSERS

CAAM has previously forecast that the market will grow 3 percent this year, in line with growth last year but significantly below the 13.7 percent gain in 2016.

GM, one of the most successful global car makers in China for decades, said earlier this month that September sales were down a sharp 14.9 percent from a year earlier. German car maker Volkswagen AG said earlier this week that China sales were down 10.5 percent last month.

China’s broader economic malaise has led to a particular slowdown in the demand for cars in smaller, lower-tier cities across China, some car makers have said, which until now were the engine of growth for the country’s auto industry.

Yale Zhang, head of Shanghai-based consultancy Automotive Foresight, said that several factors had combined to cause this, including high gas prices this year which had stymied growth in lower-tier cities.

The stalling growth could push China’s auto industry into uncharted territory. According to consultancy LMC Automotive, auto sales in China could dip this year without stimulus, after having grown uninterrupted since the early 1990s.

This pressure is now creating distinct winners and losers in the market, a major shift from golden years of growth where most players were guaranteed decent returns.

Among those struggling in China the most are Peugeot , Hyundai Motor and its Kia Motors brand, Ford Motor Co and Japanese car maker Honda Motor Co Ltd.

Reporting by Yilei Sun and Norihiko Shirouzu; Editing by Adam Jourdan and Muralikumar Anantharaman

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