China’s auto sales declined for the ninth consecutive month in March, further proving that the market isn’t as infallible as once thought. The assumption was that, as North America surpassed peak growth and flattened out, Chinese auto sales would continue an upward trajectory. But, while China did surpass the U.S. in becoming the world’s largest auto market, it’s not living up to its billing as a golden goose.
That’s not to suggest the U.S. is about to stand triumphantly atop that mountain. Automakers are issuing profit warnings for 2019 and Moody’s Investors Service expects light vehicle sales to fall 1.2 percent this year.
“The accommodative financing environment that had helped buoy U.S. car sales is receding. Maintaining operating and financial discipline will be crucial [for 2019],” the bond credit rating business advised.
While Moody’s take occupied the median position, most analysts are of a similar mind. A combination of rising interest rates and increasingly lofty transaction prices (for both new and used vehicles) are expected to finally push U.S. sales growth back down the slope. Fortunately, experts have been wrong before. Most analysts expected 2018 to end in a sales decline too, but it didn’t happen.
Still, there are more reasons to concerned in 2019 — and not just for North America. Automakers everywhere are discovering shareholders are less interested as technology investments gradually lose their luster and serious questions emerge regarding their financial wellbeing. Meanwhile, Europe’s stagnating sales and China’s own problems seem to be pointing at a global recession.
The government-backed China Association of Automobile Manufacturers reported on Friday that Chinese vehicle sales fell 11.3 percent, year-over-year, to 6.37 million in the first quarter of this year. According to The Wall Street Journal, that decline followed 12-percent and 9.6-percent dips in the previous two quarters.
From The Wall Street Journal:
Passenger-car sales declined 13.7 [percent] in the January to March period, while commercial-vehicle sales increased 2.2 [percent]. Low confidence among consumers and curbs on peer-to-peer lending businesses have made it harder for dealers to move inventory, according to auto analysts.
“The market is still in recession, and companies are under great pressure,” said the association’s assistant secretary-general, Chen Shihua. “It’s still hard to say when the point of returning to growth will come.”