China's car sales tumble, road ahead bumpy

SHANGHAI (Reuters) - China’s automobile sales fell for a seventh straight month in January, the country’s top auto industry association said on Monday, as demand slowed in the world’s largest auto market.

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Sales dropped a steeper 15.8 percent from a year earlier to 2.37 million vehicles last month, the Association of Automobile Manufacturers (CAAM) said in an emailed statement to Reuters. That followed a 13 percent drop in December and a 14 percent fall in November.

“Car sales in January continued to decline, and there was no sign of improvement. We estimate that February wholesales will also drop sharply” said Xu Haidong, CAAM assistant secretary general.

“The reason for the sales drop is still the slowing overall economy, and consumption decline in small- and medium-sized cities” Xu said.

China’s economy cooled last year to 6.6 percent, its weakest in 28 years, hit by higher trade tariffs and a government crackdown on debt, with growth set to slow further this year. Slowing consumption and the fallout of trade frictions with the United States contributed to the auto market contracting for the first time in more than two decades in 2018.

Beijing is now trying to persuade consumers to loosen their purse strings and has pledged to provide subsidies to boost rural sales of some vehicles and purchases of new energy vehicles.

“Q1 sales were good last year, so this year the industry expects to have negative growth in the first quarter,” Yale Zhang, head of consultancy AutoForesight, told Reuters, but he predicts sales will gradually pick up in the next three quarters.

Industry executives also say China’s car sales in January and February tend to be affected by the Lunar New Year holiday, as consumers hold off on their car purchasing decisions around the festival.

The holiday’s dates change annually but tend to occur in either month. It took place in the first week of February this year.

China’s sales of new energy vehicles, however, continued to buck the trend, totalling 95,700 in January, an increase of 140 percent from a year earlier, CAAM said.

Editing by Jacqueline Wong & Shri Navaratnam