China auto sales sees biggest fall in 7 years as growth engine stalls

China’s car sales dropped the most in almost seven years in September, stoking issues the world’s biggest auto market could contract for the first time in decades this year in middle of cooling economic growth and a biting trade war.

Vehicle sales slumped by 11.6 percent to 2.39 million units in September, the third straight reduction, the China Association of Automobile Manufacturers (CAAM) stated on Friday. It cited a sluggish economy, deleveraging and the pollution crackdown as factors for the steep fall.

A stalling of China’s giant auto sector will be a issue for the nation’s leaders in Beijing. It is a significant driver of the economy and an important barometer of Chinese clients’ willingness to open their purse strings.

“The automotive industry has been a driver of China’s economic growth for years. Now it is pulling back,” stated Xu Haidong, CAAM assistant secretary general, in Beijing.

China’s top auto industry body stated its already meager forecast for full-year growth would be missed, though the market must prevent a sales decrease. Analysts have predicted the market could contract 2018 for the first time since at least the early 1990s.

The downtrend in sales underscores how worldwide automakers, from General Motors to Toyota Motor, are in for a tough ride at a time when they are progressively looking towards China as a driver of growth.

It also exemplifies the effect of the trade war, with autos being one of the sectors hardest hit by tariffs. CAAM stated last month sales were affected by a sluggish economy and the knock-on effects of the trade war.