Perhaps the best data so far on the extent of the slowdown in domestic demand in China from the car sales data for the country for December and 2018 which showed the first drop in total vehicle sales for 29 years.
Sales of passenger vehicles fell 4.1% to 23.8 million in 2018, according to China’s Association of Automobile Manufacturers (CAAM) on Monday. That was the first fall since 2015.
Including trucks and buses, China’s overall vehicle sales, dropped 2.8% to 28.1 million last year – the first fall in the total market since 1990.
December sales fell 13% from the same month last year, the sixth consecutive month of decline. Analysts do not expect the government to again cut taxes as a way of stimulating sales as it did in 2015, the last time the Chinese car market saw a significant slowdown.
(In 2015 China halved sales taxes for cars with engines smaller than 1.6 litres — boosting sales by more than 4 million (especially small sports utility and so-called crossover vehicles) in the following two years and pushing total vehicle sales well past 20 million.
The tax break ended in January and has added to the pressure on sales from weakening consumer confidence (which has hit sales of other consumer products, such as iPhones).
The Financial Times reckons there’s another important development in China.
“Analysts say car ownership has reached saturation point in some cities, pointing to a growing second-hand car market, as well as improved public transport and the rise of ride-sharing services making consumers less willing to splash out on an automobile,” the paper reported on Monday.
“Other East Asian countries have struggled to sustain car market growth once GDP growth fell below 8 percent and vehicle ownership reached 20 percent, according to analysts at Nomura.
“China’s GDP growth has slowed to about 6.5 percent, while car ownership is approaching that level,” The FT said, quoting Nomura.
House price data this week for December and 2018 will provide more important data points to gauge the health of the economy.
