According to Gerard Burg, senior economist at NAB, for the Chinese economy, falling auto sales have attracted a lot of attention since the second half of 2018, but rather than a symptom of the country’s industrial woes, the falling sales figures are in part an unintended consequence of the deleveraging campaign.
Key Quotes
“Auto sales fell in 2018 – down by around 3.1% for the full year, having recorded an increase of around 5.6% yoy in the first half.”
“In recent years, auto sales have been increasingly connected to credit, as younger, more financially savvy purchasers have entered the market. In 2014, estimates suggested that around 85% of all auto purchases were paid for in cash (Reuters), but by 2018, GM Financial estimated that around 40% of Chinese purchases were made using credit. This suggests that more restrictive credit environment would be a negative for auto sales.”
“Although the deleveraging campaign appears to have had a major impact on the slowdown in auto sales, it appears that Chinese authorities are not keen for this trend to continue. Overall, auto sales account for almost 30% of goods retailing and a sizeable share of manufacturing (the broader transport sector was around 10% of the sector in 2017) – meaning that a sustained downturn in the auto industry would be a negative for China’s economy.”
“Reflecting its importance, some measures are expected this year to boost consumer demand for motor vehicles.”
Share
