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Chinese auto sector prepares for 2020 decline

By Lawrence Gash

Leading industry body envisions two per cent sales decline

The China Association of Automobile Manufacturers (CAAM) has outlined its belief that auto sales in the emerging superpower will decline for the third year in a row.

In its latest report, the CAAM doubled down on its December forecast that vehicle sales would drop by 2 per cent. This would be an improvement from 2019 in which sales fell by 8.2 per cent thanks to new emissions standards and American tariffs that somewhat crippled the sector.

With the United States and China set to sign an initial ‘phase-one’ trade deal on Wednesday January 15, it is hoped that the Chinese economy will recover throughout 2020. In return for the redress of certain trade imbalances, the Trump administration has agreed to cancel new levies on $156bn (£120bn, €140bn) of Chinese imports and to halve the current tariffs on $120bn of goods.

While this may reduce the severity of the Chinese auto sector’s slowdown, the rates of growth witnessed in the last two decades will not return, according to the CAAM. Shi Jianhua, a senior official at the organisation told reporters:

“We have moved away from the high-speed development stage. We have to accept the reality of low-speed development. We had high-speed growth for a consecutive 28 years, which was really not bad, so I hope everyone can calmly look at the market.”

The authority of the CAAM’s predictions can be said to be strengthened by the recent data of another key body in the Chinese auto industry. The CAAM had predicted that in December the sector would witness its 18th month of declining sales in 19 months. The latest figures from the China Passenger Car Association vindicate this forecast, with December sales falling 3.6 per cent year-on-year to 2.17 million units.

Although the Trump administration might feel that it succeeded in bringing China to the negotiating table through a policy of tariffs, it will likely be happy to lift such restrictions as they were beginning to bite back home.

One of America’s most important automakers, General Motors, reported a 15 per cent drop in sales to China in 2019 and voiced its concern for future growth. Matt Tsien, the president of GM in China admitted “We expect the market downturn to continue in 2020, and anticipate ongoing headwinds in our China business.” As the largest car market in the world American manufacturers are eager for the Chinese car market to recover, according to the CAAM however, this recovery will likely be subdued.

FURTHER READING:Tesla borrows $1.6bn to invest in Shanghai car plant

FURTHER READING:Chinese service sector growth slows: Caixin PMI

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