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Auto Industry Cautious About China's Sluggish Market At Start Of Decade

The China Association of Automobile Manufacturers (CAAM) last month forecast annual car sales in 2020 would dip 2 per cent after an estimated 8 per cent slump in 2019.

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China's auto market is likely to shrink for the third year in a row in 2020, the country's top auto body is expected to say on Monday, but industry watchers are cautiously hoping a sales recovery in lower-tier cities ease the pace of decline.

The drop in car sales is expected to be milder than last year when sales were pressured due to new emission standards in a broader economy that was both shrinking and under attack amid a trade war with the United States.

The China Association of Automobile Manufacturers (CAAM) last month forecast annual car sales in 2020 would dip 2% after an estimated 8% slump in 2019.

In 2018, sales declined 2.8%, halting a growth march that started in the 1990s.

"The negative effect of cutting purchase tax in 2015-2017 has disappeared, and car sales in lower-tier cities are expected to recover," said Alan Kang, a senior analyst at LMC Automotive.

"The easing of trade tensions between China and the United States has also helped restore consumer confidence," said Kang, who expects car sales in China to grow 0.05% this year.

But global automakers have been cautious with their predictions after cutting back production, shutting factories and firing staff last year.

Top executives in companies such as Geely and Ford Motor partner Chongqing Changan Automobile have said they expect fiercer competition to weed out weaker players.

On Monday, Ford said China auto sales in 2019 slumped by more than a quarter, its third straight year of decline as demand for its mass-market Ford brand and sports utility vehicles continue to be anaemic.

This fall, however, was slower than the 37 per cent drop in sales Ford weathered in 2018 and the company said it saw its market share in the high-to-premium segment stabilise last year.

But it remained cautious about 2020, echoing bearish comments about sales in China from General Motors.

"We expect the market downturn to continue in 2020, and anticipate ongoing headwinds in our China business," Matt Tsien, president of GM China, said last week as the automaker reported a 15 per cent drop in sales in 2019.

Volkswagen AG, whose sport-utility vehicles have helped it to report a smaller 1.1 per cent year-on-year fall in sales in the first 11 months of last year, has said it expects China's market to grow at a relatively low pace for the next five years.

The bright spots have been Japanese carmakers Toyota Motor Corp and Honda Motor as well as US electric vehicle maker Tesla, which started delivering China-made Model 3 Sedans from its $2 billion Shanghai plant this month.


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