Global automakers cautious about China's market at start of new decade

BEIJING/SHANGHAI (Reuters) - Global automakers are cautious about their prospective sales in China's vehicle market this year, the world's biggest, as pressures such as slowing economic growth and trade frictions look set to continue. Sales in China, where more than 28 million cars were sold in 2018, are set to contract again for the second time in a row

Reuters January 13, 2020 06:06:07 IST
Global automakers cautious about China's market at start of new decade

Global automakers cautious about Chinas market at start of new decade

BEIJING/SHANGHAI (Reuters) - Global automakers are cautious about their prospective sales in China's vehicle market this year, the world's biggest, as pressures such as slowing economic growth and trade frictions look set to continue.

Sales in China, where more than 28 million cars were sold in 2018, are set to contract again for the second time in a row. The country's top industry body, China's Association of Automobile Manufacturers (CAAM), said it expected annual car sales to drop 2% this year and will announce 2019 full-year sales figures later on Monday.

Automakers had enjoyed double-digit annual growth in China as recently as four years ago before the brakes came on with sales contracting in 2018, the first annual contraction since the 1990s. Hopes for a return to growth in 2019 were later dashed by the chaotic implementation of new emission rules by local governments.

The prolonged sales crisis has so far driven carmakers to consider shutting capacity and laying off staff. Top executives such as Geely's [GEELY.UL] founder, Li Shufu, to the president of Ford Motor Co's partner Chongqing Changan Automobile Co Ltd <000625.SZ>, Zhu Huarong, have said they expect fiercer competition to weed out weaker players.

For 2020, bearish projections have come so far from the likes of General Motors, China's second-biggest foreign automaker, which reported a 15% dip in 2019 sales last week.

"We expect the market downturn to continue in 2020, and anticipate ongoing headwinds in our China business," said Matt Tsien, GM executive vice president and president of GM China.

Volkswagen Group, whose sport-utility vehicle models have helped it to report a smaller 1.1% year-on-year drop in sales in the first 11 months last year, has said it expects the market to grow at a relatively low pace until around 2023 and 2024.

Alan Kang, senior analyst at LMC Automotive, predicted modest sales growth of 0.05% this year.

"The negative effect of cutting purchase tax in 2015-2017 has disappeared, and car sales in lower-tier cities are expected to recover. The easing of trade tensions between China and the United States has also helped restore consumer confidence," he said.

The few companies still enjoying growth have been mainly Japanese automakers, data showed.

Toyota Motor Corp <7203.T> sold around 1.62 million Toyota and premium Lexus cars in China last year, a 9% sales jump compared with a year earlier. Honda Motor Co's <7267.T> China sales also grew 8% year-on-year to a record 1.55 million cars.

Tesla Inc is also betting against the gloom, having started delivering China-made Model 3 vehicles from its $2 billion Shanghai plant this month. It saw sales double in the first 11 months last year to more than 38,000 units, according to LMC Automotive.

(Reporting by Yilei Sun and Brenda Goh; Editing by Jacqueline Wong)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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