China Car Market Returning To Growth

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SHANGHAI — Reurers reported that China’s car market will return to growth in the second half of this year due to government support, although the days of high single- or double-digit growth are over and consolidation is likely, senior automotive executives said on Tuesday.

The predictions from executives including the head of Mitsubishi Motors on the first day of the Shanghai auto show point to a vehicle market that is heading for more balanced growth, especially if the trade war with the U.S. is resolved.

Automotive sales in China contracted for the first time last year since the 1990s as a slowing economy and the trade friction between Beijing and Washington affected consumer sentiment.

Recent moves by the Chinese government to cut taxes, carmakers’ plans for new model launches as well as the hopes that the U.S.-China trade spat will soon be resolved could start to turn things around, the executives said.

“We predict there will be negative growth in the first half this year, even double digit,” said Guangzhou Automobile Group Co Ltd’s (GAC) general manager Feng Xingya.

“But due to government subsidies, carmakers’ discounts and better macroeconomic conditions, sales will turn to positive in the second half,” he said.

The decline in Chinese automotive sales has already started to slow. They fell by 5.2 percent in March, the smallest decline since August 2018.

“It’s only natural for the China market to transition to slower growth,” Mitsubishi Motors’ Chief Executive Osamu Masuko told Reuters in an interview, saying that the market was showing some “level of maturity.”

“Going forward the market still has more growth left in it, but it will likely grow moderately. Growth of 5-6 percent a year on a consistent basis might not be that easy to achieve.”

The opening day of the auto show was marked by launches of new sports utility vehicles from carmakers such as General Motors and Daimler, aimed at rejuvenating customer interest with fresh designs in the fast-growing market segment.

Some firms were more optimistic with luxury carmaker Rolls-Royce Motor Cars saying that it would likely achieve double digit sales-growth in China again this year, although below 2018 levels.

But others predicted that more pressure is to come as Beijing institutes tough rules to transform the industry which could kick off a round of consolidation or prompt some to leave the Chinese market.

“That’s more likely to happen to small, non state-owned players who really don’t have a whole lot to offer,” said GM’s China President Matt Tsien, adding that it could extend to some foreign players.

The government has this year tightened the screw on makers’ ability to add manufacturing capacity and is instituting electric car production quotas for automakers to combat pollution.

“But I don’t believe the number is going to be significant, Tsien said. “Because at the end of the day this is still one of the most attractive markets in the world. And everybody wants to be here.”