The Chinese automotive industry is suffering its first sustained downturn in at least two decades. As previewed in our July update, sales in China started to turn over the summer. After a 4.8% increase in June, sales fell by 4% in July and 3.8% in August. In September, vehicle sales fell by 11.6%, with SUVs, the strongest performer, suffering a 10.1% drop that month. In October, Chinese officials said lower auto sales were the “new normal.” October sales declined by 13%, and November saw the decline steepen further to 19%. Sales of SUVs were down 16% in November compared to 2017.
The Chinese auto industry originally projected a 3% sales growth for the year, but sales to date are now down 1.7% year over year.
Analysts blame a variety of factors for the decline: a trade war with the US, a crackdown on peer-to-peer lending, a pollution crackdown, and slower economic growth in China. Forbes raised the question whether China’s auto market has reached its “saturation point”, and Bloomberg posited that China’s auto market was “maturing” such that buyers are not purchasing anything and everything any longer.
Now, the industry is considering how the decline will affect the economy as a whole. The assistant secretary general of the China Association of Automobile Manufacturers said “The automotive industry has been a driver of China’s economic growth for years. Now it is pulling back.” Factories are feeling the impact, and retail sales are also growing at their weakest pace since 2003.
Whether the trade war will continue is yet to be seen, with the US and China engaging in ongoing talks. Just three days ago, China temporarily suspended additional tariffs on US vehicles and auto parts, such that tariffs will fall from 40 percent to 15 percent for January through March. However, the lower tariffs are not expected to have a major impact on car sales. In the meantime, China’s auto market is set to contract for the first time since the early 1990s.
This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney.
This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary.
The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites.
In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.
