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01958 BAIC MOTOR
RTNominal down1.800 -0.030 (-1.639%)
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14/09/2018 14:05

Auto sales decline poses challenge for automakers - Moody's

[ET Net News Agency, 14 September 2018] China's auto unit sales declined for a second
consecutive month in August versus the same period in 2017, the China Association of
Automobile Manufacturers (CAAM) said on 11 September.
Moody's Investors Service said the decline is a challenge for automakers and likely
reflects weaker corporate and consumer sentiment resulting from the ongoing US-China trade
dispute, and last year's high base of comparison.
Unit sales of commercial and passenger vehicles made in China were 3.8% lower this
August than in August 2017, according to CAAM. July unit sale were down 4.0% from July
2017. As a result, China's year-on-year auto unit sales growth decelerated to 3.5% in the
first eight months of 2018 from 5.6% in the first six months of the year.
The decline signals weakening demand for autos and slowing sales growth. These
developments will likely increase competition among Chinese automakers and cause some to
reduce prices to spur sales, which in turn would compress profitability.
The credit rating agency believes the US-China trade dispute, which escalated in July
with the US's implementation of tariffs on $34 billion of Chinese goods, is weighing on
auto sales. Uncertainty over the effects the tariffs may have on China's exports, and any
knock-on effects to the broader economy, are likely causing companies and consumers to
hold off on large purchases such as autos.
Despite the sales decline in July and August, Moody's continues to expect year-on-year
auto unit sales to rise 2% for full-year 2018, given the 3.5% year-on-year growth from
January through August. Year-on-year growth was 3.0% for full-year 2017.
Sales in 2017 reflected a tax cut on purchases of small-engine passenger vehicles. The
government implemented the tax cut in October 2015 and adjusted and extended it through
year-end 2017. Its implementation followed weak auto sales during the first eight months
of 2015. Moody's believes consumers who might otherwise have purchased a vehicle in 2018
made the purchase in 2017 to take advantage of the reduced tax.
The slowing but still growing auto unit sales is driven by China's economic growth,
which Moody's expects will be 6.6% in 2018 and 6.4% in 2019. Also driving auto sales
growth is China's rising but still low vehicle penetration of about 156 vehicles per 1,000
people in 2017, according to data from the Ministry of Public Security and National Bureau
of Statistics.
China is the world's largest auto market. Unit sales of passenger and commercial
vehicles produced in the country reached 29 million units in 2017, according to CAAM,
accounting for about 30% of global auto sales. About 96% of those units were sold within
China. (KL)

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