The China auto industry faced a 13.9% sales decline in November, which was its worst decline since January 2012. Sales for the month amounted to only 2.55 million as a result of the ongoing U.S.-China trade war and slow economic growth. As per the China Association of Automobile Manufacturers, year-to-date sales were 25.4 million, down 1.7% from the same period a year ago.
November’s sales decline followed a roughly 12% drop in each of the past two months. The size of the decline places the industry on track for having its first annual sales loss in 28 years.
The numbers of November
Combined sales of SUVs, vans and minivans in the world’s hottest car market, China, dipped 16% year-on-year to just under 2.2 million. Commercial vehicle sales, in contrast, spiked 1.7% to 3.7 million units.
Additionally, sales of gasoline-electric hybrid and pure-electric cars and SUVs, which the government is promoting aggressively by virtue of subsidies and sales quotas, inched up 37.6% to 169,000 vehicles. Sales during January-November period for the same were just over 1 million, up a mammoth 68%.
Competition from foreign automakers
Domestic brands from state-owned manufacturers facing fierce competition from the foreign rivals led to the sales downfall.
The foreign automakers slashed prices of their cars in China in view of increasing sales volumes. As more lucrative and established foreign brands were available at lower prices, the homegrown vehicles are being overlooked despite lower prices. Hyundai Motor and other foreign automakers, for instance, have trimmed prices by 10-15% and have also introduced models costing less than $14,500.
The Great Wall Motor, a private-sector Chinese carmaker, experienced a 40% sales decline in its luxury Wey model. Another private-sector Chinese carmaker, Zhejiang Geely Holding Group, saw year-to-date sales volume increasing 29%.
Last word
The government is keen not only to promote electric vehicles but also new energy vehicles as evidenced by the fact that through November, sales of new energy vehicles have already surpassed 1 million mark. Sales of new energy vehicles have risen 20% year to date.
Currently, automakers such as General Motors (GM, Financial) and Volkswagen AG (VOW3, Financial) are already putting in billions of dollars in China to develop vehicles that suit local Chinese customers. This indeed poses a threat to local Chinese carmakers.
Disclosure: I do not hold any position in the stocks mentioned.
