(Bloomberg) -- China vehicle sales fell for the first time in 28 years, raising prospects of government-led stimulus to revive demand in the world’s biggest auto market as consumers from Europe to U.S. balk at buying new cars.
Deliveries of passenger vehicles to dealers fell 4.1 percent to 23.7 million units last year, while overall auto deliveries declined 2.8 percent to 28.1 million units, the China Association of Automobile Manufacturers said Monday. Last week, data from the China Passenger Car Association revealed a 6 percent drop in retail sales.
The slump in China, which has been a crucial growth engine for the world’s carmakers, is adding to the headwinds manufacturers are facing globally at a time the industry is under pressure to spend billions of dollars in its shift to electric and autonomous vehicles. Ford Motor Co. and Jaguar Land Rover are among the majors that have announced job cuts amid the sudden dip in demand for conventional vehicles and tougher emission standards.
Rising prices, political upheavals such as the prolonged fight over Brexit, dislike for diesel and new services such as car-sharing are eating into auto demand in countries such as the U.K. and U.S. The world’s second-biggest market has seen buyers preferring spacious SUVs, sparking a collapse in the demand for the traditional sedans. Deliveries in Germany fell 7.6 percent in December, indicating broader troubles in a market expected to contract in 2019, according to Evercore ISI. On the other hand, India reported a 5 percent gain in sales last year to 3.4 million units.
For China, economists see growth in the world’s second-largest economy slowing to 6.2 percent this year from 6.6 percent in 2018, as an unresolved trade war with the U.S. dents consumer confidence and dims the outlook.
Feeling the pulse of the market after the tariff war with the U.S. damped domestic demand, an official at China’s National Development Reform Commission said last week Beijing will roll out measures to boost sales of cars and household appliances.
“There’s still potential to support residents’ reasonable consumption,” NDRC Vice Chairman Ning Jizhe told state broadcaster CCTV. The government plans to draft relevant policies to stimulate purchases in rural areas, he said.
Just as the Americans, Chinese consumers have also been turning away from sedans opting for SUVs over the past decade as a combination of rising income, lower gasoline costs and policies allowing more children trigger a shift. Last year, annual delivery of sedans doubled from 2008, while SUVs surged more than 20 fold.
Goldman Sachs Group Inc. isn’t optimistic about 2019. Sales volume is likely to drop 7 percent this year, it predicts, while Cui Dongshu, secretary general of the China Passenger Car Association, expects a 1.2 percent increase. Volkswagen AG’s China chief Jochem Heizmann predicts industry sales will fall in the first half of this year, while General Motors Co. expects close to 27 million units, in line with last year.
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