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Chinese Auto Sales Accelerate Historic Collapse, Set For First Annual Decline In 30 Years

Progress in the United States/China trade war seems to be happening at just the right time.

The automobile industry in China has been crippled, partly as a result of this trade war, partly due to the ongoing domestic economic slowdown in the mainland, and absent major subsidies – which don’t appear to be coming – the outlook for the rest of 2018 and 2019 is not promising. The collapse has been historic and according to new data, continued through November.

November data confirmed a continuation of the ugly trends that we discussed last month. For instance, passenger vehicle wholesales were down 16.1% on the year, according to the China Association of Automobile Manufacturers. This data includes sedans, SUVs and crossover utility vehicles.

November vehicle wholesales were also down well into the double digits, dropping 13.9% to 2.55 million units year-over-year. Total retail passenger vehicles fell 18% on the year and SUV sales fell 20.6% year-over-year to 854,289 units, according to the Passenger Car Association.

As a result, CICC now expects China’s full year production and sales to drop more than 5% year-over-year for 2018. This would be the first annual decline in Chinese car sales in nearly three decades.

They also predicted that inventory levels at dealerships across the country will likely continue to rise as automakers “stuff channels” in hopes of fooling investors that sales are stronger than they are. The sales data for November suggested “much weaker demand in lower end segments and fears [of] competition in the SUV market” according to the CICC note.

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They association concluded that a turnaround for the sector is only likely after Spring Festival, which occurs in the beginning of February. CICC found that domestic brands are becoming more competitive in new energy vehicles and SUV’s, while Japanese carmakers still have the advantage in sedans.

To be sure, this should not come as a surprise to regular readers as we have been reporting on the anemic numbers coming out of China in both October and November, although the severity of the slowdown has caught even the optimists by surprise.

Last month we also noted that China was mentioned very cautiously by automakers, many of whom offered pessimistic forecasts for the remainder of this year. Renault recently blamed its poor numbers on a global slowdown in sales in places like China and Europe, as well new emissions standards. Volkswagen also recently cut its sales forecast for China, citing a slowdown in the country as well as the looming trade war with the United States. 

China’s slowdown has also hit names like General Motors which last month reported a 15% drop in China deliveries for the three months ended Sept. 30, the first quarterly report since the trade tensions with the U.S. began escalating in July.

That said, on Tuesday morning it was reported that China is considering cutting its tariffs on US autos, which could potentially serve as a short-term boost to demand.

Bloomberg said China is planning to cut tariffs on US-made cars to 15% from the current 40% has been submitted to China’s Cabinet to be reviewed in the coming days. China boosted tariffs on US-made cars to 40% as part of a raft of retaliatory measures against the US imposed over the summer. To be sure, nothing is set in stone just yet. The decision is being reviewed, and could still change.

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Source: zerohedge.com

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