China's car sales collapse, the road is bumpy

SHANGHAI (Reuters) – Auto sales in China fell for a seventh consecutive month in January, the country's largest automobile industry badociation said Monday, as demand slows on the biggest car market of the world.

Sales dropped 15.8 percent from the previous year, reaching 2.37 million vehicles last month, said the Automobile Manufacturers Association (CAAM) in a statement sent by email to Reuters. This followed a drop of 13% in December and 14% in November.

"Car sales in January continued to decline and there was no sign of improvement. We estimate that February's wholesale sales will also fall sharply, "said Xu Haidong, deputy secretary general of CAAM.

"The reason for the decline in sales is still the general slowdown in the economy and the decline in consumption in small and medium cities," said Xu.

The Chinese economy fell last year to 6.6%, its lowest level in 28 years, hit by higher tariffs and government debt repression, and growth is expected to slow further this year . The slowdown in consumer spending and trade frictions with the United States contributed to the contraction of the automotive market for the first time in more than two decades in 2018.

Beijing is now trying to persuade consumers to loosen their pockets and is committed to providing subsidies to stimulate sales of some vehicles in rural areas and the purchase of new energy vehicles.

"First quarter sales were good last year. The industry is therefore expecting negative growth in the first quarter, "Yale Zhang, head of the AutoForesight consulting firm, told Reuters.

Industry leaders also said that car sales in China in January and February tended to be affected by Lunar New Year holidays, with consumers delaying their car purchase decisions during the festival.

Holiday dates change every year but tend to happen within two months. This took place the first week of February this year.

Sales of new energy vehicles in China, however, continued to trend, reaching 95,700 in January, an increase of 140 percent over the previous year, said CAAM.