Asia Minute: China’s Declining Car Sales Hit Automakers

Mar 13, 2019

Traffic in Beijing | 2005
Credit Wikimedia Commons

The United States and China are continuing trade talks, and the outcome remains uncertain. On Tuesday, U.S. Trade Representative Robert Lighthizer told a Senate panel “our hope is that we are in the final weeks” of the talks. But in the meantime, one area that’s experiencing some volatility is China’s auto sector.

These are relatively difficult days to be selling cars in China. Last month, vehicle sales in the country fell by 14 percent compared to a year earlier. That’s the eighth month in a row they’ve declined.

China’s overall economic growth outlook has been restrained this year – the government is targeting growth of 6 to 6.5 percent for 2019 – the slowest in nearly thirty years.

Car sales have been slumping even before the downward revisions to growth.

Last year, car sales in China fell by nearly three-percent from the year before — their first annual decline in more than two decades. There’s also caution about the road ahead, and some foreign automakers are planning changes.

Over the past year, China has eased some of its rules about overseas participation in its car market, but those changes have not prevented other moves by foreign companies.

Reuters reports that both Korean automaker Hyundai and its affiliate Kia are considering scaling back production in China. And the more noteworthy part of the story may be a deeper look at the longer term corporate strategy at work.

Kia is currently building a new factory in India, while Hyundai is planning a second production center and a new sales company as a joint venture in Vietnam.