Retail car sales in China shrank for the second consecutive year in 2019, including a 4% decline last month.
The Chinese market has been on a negative sales bender since mid-2018, thanks to slower economic growth, trade tensions and the jittery consumer confidence that result from both factors. New-car deliveries dropped 6% in 2018 and 8% last year, according to the China Passenger Car Assn.
Good News, Bad News
The good news: The rate of year-on-year decline has been slowing since September. CPCA predicts a 1% gain in retail car sales this year.
The bad news: Factory wholesales to dealers are likely to shrink 2% in 2020, marking their fourth straight annual decline, says the China Assn. of Automobile Manufacturers.
The gap between the two forecasts suggests dealers are still trying to sell down existing inventories. That means they’ll be doing more selling to consumers than buying from manufacturers in 2020, at least for the next several months.
It also suggests that carmakers in China are finally ready to deal with an issue analysts have been urging them to address for years: revisiting their assumptions about capacity expansion.
China is still a long, long way from coming anywhere near the vehicle saturation levels of Europe or North America. But the market also has been due for a breather after years of double-digit growth. Nobody thinks demand for cars has peaked in China.
The question now is what that demand will look like when it revives.
Relentless government incentivizing has made China the world’s largest market for hybrid and all-electric vehicles.
But consumer enthusiasm for pricey electrified vehicles faded as soon as the government began dialing back those discounts last year. Demand for these so-called “new energy” cars plummeted by one-third in 2019.
Central planners figure it’s time for EV makers to prepare to go it alone, even if that means many domestic producers merge or go out of business. In the meantime, the government is mulling a scheme to redirect its support from sales to expanding China’s network of EV charging stations.
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