| 11:10 AM EST

Car Sales in China to Drop Again

China, the world’s largest car market, contracted by 8% to 25.8 million vehicles last year and is likely to shrink another 2% in 2020.
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China, the world’s largest car maker, contracted by 8% to 25.8 million vehicles last year and is likely to shrink another 2% in 2020, says the China Assn. of Automobile Manufacturers.   

A correction has been long overdue. But it isn’t clear when the Chinese market will establish a more sustainable growth pace.

CAAM’s numbers are wholesales from the factory to dealers. These transactions, not retail sales, are the ones that generate income for carmakers. Wholesales tend to lag retail sales activity when consumer buying cools.

Overdue Adjustment

The contraction began 18 months ago. Even China’s red-hot market for electric cars has lost momentum. CAAM says the country’s EV market declined 4% to 1.2 million vehicles in 2019 and isn’t likely to do much better this year. Central planners had forecast annual EV sales of 2 million units by now.

A slowdown is long overdue. China has been on a steady growth spurt, usually with double-digit annual gains, for 28 years. Now the market is moving into an era of “low-speed development,” CAAM says. Or will as soon as sales actually begin expanding again.

That could occur in 2021. But carmakers aren’t expecting miracles. Volkswagen, for one, anticipates only single-digit growth for the Chinese car market until at least 2025. Last week, General Motors reported a 15% drop in sales last year and was vague about when sales activity will perk up.

Ditto for Ford. The company and its Chinese partners managed to reduce their year-on-year sales decline from 37% in 2018 to 26% last year, when their sales in China dropped to 567,900 cars and trucks. One hopeful sign: Fourth-quarter volume dropped a mere 15%, thereby gaining 12% compared with the previous quarter.

Hope at the High End

Ford says it has been feeling the most pain in China at the low-end of its lineup. The carmaker reports that demand for its more expensive models is holding steady, which indicates where the company will concentrate its marketing activities this year.

Like GM, Ford hasn’t ventured a prediction about when even modest market expansion will return in China.

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