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China's Auto Sales Plummet 92% This Month as Coronavirus Fears Put the Brakes on New Car Sales

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【Summary】The Coronavirus has stalled auto production in China and caused new vehicle sales to plummet this month. The China Passenger Car Association (CPCA) said that retail sales of passenger cars in China plummeted 92% on an annual basis in the first 16 days of February.

Eric Walz    Feb 21, 2020 11:05 AM PT
China's Auto Sales Plummet 92% This Month as Coronavirus Fears Put the Brakes on New Car Sales
The assembly line of a Dongfeng-PSA factory in Wuhan (Photo: Reuters)

China is the world's biggest auto market not only for Chinese automakers, but for global automakers that built cars in joint ventures with their Chinese partners. Any disruptions in the supply chain and production can have a ripple effect throughout the auto industry, which is happening with the recent Coronavirus outbreak. 

The Coronavirus has stalled auto production in China and caused new vehicle sales to plummet this month. The China Passenger Car Association (CPCA) said that retail sales of passenger cars in China plummeted 92% on an annual basis in the first 16 days of February.

China's passenger vehicle sales recorded 4,909 units in the first 16 days, down from 59,930 vehicles in the same period a year earlier, according to data gathered by the CPCA. As a result of the virus outbreak, customers have refrained from shopping for new cars, leaving auto dealerships in with very few customers walking through the door.

"Very few dealerships opened in the first weeks of February and they have had very little customer traffic," the CPCA said.

Mainland China recorded 889 new confirmed cases of Coronavirus infection on Thursday. The death toll also rose by 118 to 2,236, mostly in the Hubei provincial capital of Wuhan where the outbreak began. The region remains under virtual lockdown as the Chinese government races to control the virus.

Wuhan is the ‘Detroit' of China

The "Wuhan lockdown" as the media calls it, has been expanded to cities in the central province of Hubei and now confines more than 50 million people, an unprecedented effort by the Chinese government. The region also happens to be the home of the Chinese auto industry, just like Detroit is to U.S. carmakers.

Wuhan and the rest of Hubei province account for 9% of total Chinese auto production, according to S&P Global Ratings. General Motors, Nissan, Renault and Honda have factories in Wuhan. 

Nissan and Honda produce around 2.2 million vehicles a year in the city. In 2018, General Motors together with its joint venture partners sold more than 3.64 million vehicles in China. Many of these vehicles were built in Wuhan with GM's Chinese partner SAIC Motor.

SAIC General Motors Corporation Limited is a joint venture between GM and China's SAIC Motor. The GM-SAIC plant in Wuhan which stated producing vehicles in 2015, employs around 6,000 people, representing around 10% of GM's total workforce in China.

China's auto market is likely to see sales drop over 10% in the first half of the year due to the Coronavirus outbreak, and around 5% for the entire year, provided the epidemic is effectively contained before April, the country's top auto industry body, the China Association of Automobile Manufacturers (CAAM), told Reuters last week.

To help stabilize the market, China's commerce ministry said it will introduce more measures to boost auto consumption, but what those measures will be is unclear.

Even before the Coronavirus fears, auto sales have been cooling in China for the first time in nearly 30 years. In January, new vehicle sales fell 18% from a year ago to 1.94 million units in January 2020, the 19th consecutive month of decline according to the CPCA.

Sales of new energy vehicles (NEVs), which include fully-electric, plug-in hybrid models decreased for six consecutive months, falling by 27.4% after the Chinese government reduced incentives, saying that some companies have become overly reliant on the subsidies. 

For the full year of 2019, sales dropped 8.2%, with sales of NEVs dropping 4% to 1.24 million units, according to the CPCA.

It was the first time since the 1990s that auto sales fell in China. Even without the recent Coronavirus fears, the drop is being attributed to China's slowing economic growth and ongoing trade tensions with the U.S.

resource from: Reuters

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