TANGSHAN, China—The wheels are coming off the world’s biggest auto market after decades of blistering growth, as a prolonged and unprecedented sales slump partly induced by policy changes closes thousands of dealerships, idles factories and weighs on an already slowing economy.
In Tangshan, a city of about 7.6 million in the country’s north known for its steel producers and heavy industry, around five of the 30 dealerships in the Lunan Car Culture Industrial Park have closed in the past year, dealers said. Abandoned furniture sits in empty showrooms, while “For Rent” signs appear behind shuttered glass doors.
Similar scenes are unfolding across small and midsize cities like Tangshan that supercharged China’s auto-market expansion in recent years, even as growth was capped in megalopolises like Beijing and Shanghai, where congestion and pollution led the government to place quotas on license-plate issuance.
New data on Monday showed auto sales in China fell for a second straight year in 2019. Last year, 25.8 million vehicles were sold, an 8.2% decline from 2018, according to the China Association of Automobile Manufacturers. Auto industry executives say this year will be tough again, although some expect a rebound later in 2020.
Foreign and domestic auto makers, habituated to growth in a market where their biggest challenge was building factories quickly enough to meet demand, are hurting. General Motors Co. posted its biggest-ever China sales drop last year and warned of a tough 2020. Ford Motor Co. ’s annual sales fell for the third year in a row, by 26% to 570,000 vehicles—less than half the nearly 1.3 million vehicles it sold at its peak in 2016.
SHARE YOUR THOUGHTS
How do you expect the Chinese auto market’s downturn to affect the global industry, if at all? Join the conversation below.
France’s PSA Group, which owns Peugeot, exited a joint venture with a local partner in recent weeks. And Tangshan-based Pangda Automobile Trade Co., once one of China’s biggest dealership chains, went bankrupt last year.
“This is now the new normal,” Volkswagen Group China Chief Executive Stephan Wöllenstein told The Wall Street Journal in November. Other major markets typically see ups and downs in car demand every few years, but China has known only growth for three decades. The slump, he said, is “a new phenomenon in China which nobody was really aware of—that an automotive market also could turn down.”
The downturn has been unfolding for the past year and a half.
Beginning around 1990, China’s auto market grew continuously from virtually nothing into a behemoth, eclipsing the U.S. by 2009 and posting many years of double-digit-percentage growth along the way. An expanding middle class fueled demand for new vehicles, prompting foreign auto makers to create joint ventures with locals and invest heavily in building new plants. The total number of cars owned by China’s 1.4 billion citizens reached 260 million last year.
The mood began to change in early 2018 after a tax rebate that had helped fuel sales of many domestic brands ended, and the decline began that summer as U.S.-China trade tensions brewed.
The rebate, which halved the 10% tax rate before raising it to 7.5%, was first offered in 2015 for small-engine vehicles, making new cars more affordable for lower-income consumers, many of whom live in smaller cities. But the policy likely also frontloaded demand, analysts said, and when the government removed the incentive, the appetite for new cars diminished.
Some analysts say the market still has room for growth, since China’s car ownership rate is much lower than in other major markets. Only 173 of every 1,000 people own a car in China, compared with 837 in the U.S., according to McKinsey & Co. But “it may take a few years for the impact of the tax rebate program to fully dissipate,” said Jing Yang, director of corporate research at Fitch Ratings.
Policy reversals on government subsidies for “new-energy vehicles,” including electric cars, further upended the market. Since the bulk of the subsidies expired in June, their sales have declined for six straight months into December. In 2019, sales fell 4% to 1.2 million vehicles, the China Association of Automobile Manufacturers said.
China’s broad economic slowdown isn’t helping. Investment in sectors including manufacturing and industry is slowing. Real-estate prices have climbed in many cities, leaving potential car buyers with less disposable income. In Tangshan, consumers and dealers say the slowing economy has made people more cautious about splurging on big-ticket items like automobiles.
Auto makers operated at 76.1% of their production capacity in the July-September period, down 3.5 percentage points from a year earlier for a fifth straight quarter of decline, data from the National Bureau of Statistics show.
Those suffering include Chinese auto makers like SAIC Motor Corp. and Geely Automobile Holdings Ltd. that sell lower-priced vehicles, as well as American, French and South Korean companies. Hyundai Motor Co. and its subsidiary Kia Motors Corp. said their combined vehicle sales globally in 2019 were the lowest in seven years, partly because of China. Japan’s Suzuki Motor Corp. retreated from China in 2018 after sales soured.
Other Japanese car makers have increased market share. Toyota Motor Corp. and Honda Motor Co. both posted 9% annual sales growth. And as many luxury brands post solid sales, U.S. luxury electric-car maker Tesla Inc. built a new factory last year in Shanghai, where it has recently begun assembling Model 3 sedans and later plans to manufacture the Model Y compact sport-utility vehicle.
Many dealers in China are being squeezed. In 2018, 53.5% of the roughly 1,400 dealerships polled had posted losses, according to a survey the China Auto Dealers Chamber of Commerce released in April. Around 1,000 dealerships closed in the first nine months of 2019, said Lang Xuehong, deputy secretary-general of China Automobile Dealers Association. For all of 2019 and the first half of 2020, the association expects some 6,000 dealers to shut down—representing one-fifth of China’s dealers overall, she said.
The fallout is particularly pronounced in smaller cities that once drove market growth. At a small Tangshan auto show in November, Qin Jingbo, a 28-year-old dealer of Geely cars waited for potential customers. Mr. Qin’s dealership used to sell more than 200 vehicles a month but now sells around 150, he said, blaming economic uncertainty for curbing consumer demand.
China’s fight against pollution has led many Tangshan steel plants to halt operations periodically to control air quality, hitting workers’ salaries and making employment less certain, dealers said.
The city’s auto market woes have been intensified partly because it is home to Pangda Automobile, the big dealership chain. Listed on the Shanghai Stock Exchange in 2011, Pangda expanded rapidly, growing to more than 700 stores by late 2015. But as the company invested in land and the market slowed, debts mounted. Pangda said it has closed more than 300 stores. In the Tangshan region alone, the dealer has shut around 50 locations, mostly selling small Chinese brands.
When Pangda listed, “the overall Chinese auto market was booming and growing rapidly,” the company’s new president, Zhao Tieliu, said in an interview. “No one could see at that time the market was at a saturated stage and would quickly go down.”
—Raffaele Huang, Yin Yijun and Bingyan Wang contributed to this article.
Write to Yoko Kubota at yoko.kubota@wsj.com
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
"Market" - Google News
January 14, 2020 at 04:07AM
https://ift.tt/35LCcFT
China’s Auto Market Stumbles After 30-Year Boom - Wall Street Journal
"Market" - Google News
https://ift.tt/2Yge9gs
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
Related Posts :
Stock market: Here’s why your 401(k) is celebrating 2019 before ringing in 2020 - USA TODAY- Stock market open New Year's Eve, but closed Jan. 1 for New Year's Day - USA TODAY
- Asia-Pacific markets dip on last trading day of the year - MarketWatch
- Santa Delivers 12 Days Of Stock Market New Highs, Then Flies Away On Day 13 – Now, What? - Forbes
- Stock Market Today: Dow, S&P Live Updates for December 31, 2019 - Bloomberg
0 Response to "China’s Auto Market Stumbles After 30-Year Boom - Wall Street Journal"
Post a Comment