A new report from IHS Markit has outlined how the global data research company is expecting light vehicle (LV) sales in China for 2019 to decline by 6% over 2018 figures.
That sale decline is reflected in annual figures. Over the period from July 2018 – June 2019, total national vehicle sales reached 25.40m units, a decline of marginally more than 10% year-on-year.
The drop in sales in 2018 marked the first overall annual decline in China national sales this century.
Although electric vehicle sales in China remain ‘a bright spot’, the numbers are not sufficient to off-set the general sales decline.
Factors contributing to the sales slowdown include a clamp down on loan availability, dealer destocking, and the transition to Euro 6 compliant vehicles.
Changes in the tax code covering vehicles with smaller engines are thought to have brought forward customer purchase decisions, which could also be part of the resulting market slowdown.
Even the proliferation of ride-hailing services is highlighted as having an effect on vehicle buying, to the tune of 300,000 lost vehicle sales (estimated).
Carmakers had been using the China market to shore up declining sales in other global regions. Should the decline in China LV sales be more protracted, it will require a reassessment of related strategies, including the amount of direct investment in local China vehicle production.
Commenting on the report, Nigel Griffiths, chief automotive strategist at IHS Markit, said: “Recent sales trends point to a decoupling of car sales and economic growth in China. This is a fundamental shift, since the two have been strongly correlated up to this point.”
While the vast majority of plastic components used for local vehicle assembly are sourced from national plastics producers, there are a series of component manufacturers which have invested to support OEM production in China or gone so far as to follow their OEM customers into the market.
The stalling of the China market should not be a cause to consider a market repositioning, but any new investment might need to be reconsidered in light of the current softening of the market.