Declining China car sales show economic rebound still unstable

china cars

Car sales in China retreated in June after a rare increase during the previous month, indicating that the world’s biggest auto market is dealing with a bumpy recovery from a two-year decline worsened by the coronavirus pandemic.

In June, the retail sales of sedans, SUVs, minivans, and multipurpose vehicles dropped 6.5% to 1.68 million units in June from a year earlier, the China Passenger Car Association (CPCA) reported on Wednesday. Sales had increased 1.9% in May, the first increase in a year.

The drop is a setback for an industry betting that demand will get back to normal as the coronavirus restrictions eased in China and showrooms and malls reopen. Yet the economy is still recovering, and the auto industry’s long-term challenges remain: ride-hailing apps are decreasing the need for personal ownership, and fast-developing new technologies such as electrified motors may be prompting some consumers to put off purchase decisions.

Last month, the industry saw a particularly tough year-earlier comparison: Sales increased in June 2019 as dealers offered discounts to push models that risked becoming unnecessary by new emission standards taking effect the following month.

Premium marques such as BMW and Mercedes-Benz have stemmed from the decline quicker, helped by demand from wealthier consumers, while cheaper local brands have been hit. In the mid-tier of the market, performance has varied: Nissan Motor sales increased 4.5% last month in China while Honda Motor declined by 4.1%. China’s Geely Automobile Holdings had a 21% sales increase.

The industry’s full-year sales may decline by about 10% after big declines at the height of the virus crisis early in 2020, PCA Secretary General Cui Dongshu stated in April. That would be a third straight annual decline.

Sales of new-energy vehicles, including electric cars, also continued to drop, PCA stated. NEV sales dropped 35% to 85,600 units, after a decline of 26% in May, 30% in April, and 49% in March.

Tesla Inc. represented about 23% of electric-car sales, PCA said. The U.S. automaker, which started deliveries from its new Shanghai factory around the start of 2020, has quickly grabbed market leadership and become a rare example of an electric automaker increasing monthly registrations this year.

After increasing rapidly for several years, electric-car sales have lost momentum since the government decided to limit subsidies in mid-2019. The pandemic also hurt demand, and declining oil prices have made gas guzzlers more competitive. China still considers electric cars a priority and has introduced stimulus measures to help the automobile industry recover.

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