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A sudden surge in passenger car sales didn’t revive China’s cratering auto market

Reuters/Jason Lee
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By Echo Huang
Published Last updated This article is more than 2 years old.

China car sales continue to plunge in June even though back-to-back policy changes helped monthly passenger car sales grow for the first time in a year.

The country saw vehicle sales drop more than 12% in the first six months of 2019, which means the country is heading for an even worse year than it had last year, when it recorded its first annual decline since 1990.

China’s auto sales fell 9.6% to 2.04 million in June from a year ago, according to data released today (July 10) by the government-affiliated China Association of Automotive Manufacturers. China’s auto sales for the first half year reached 12.3 million.

The 12th straight monthly decline in vehicle sales came even though passenger car sales grew 4.9% to 1.8 million in June from a year earlier, according to figures from China Passenger Car Association. They contributed 87% of June’s sales. Still, for the first six months, passenger car sales were down almost 10% (link in Chinese) to around 10 million units from the same period last year.

June’s passenger car growth came thanks to back-to-back changes in emissions standards for petrol cars and to electric car subsidies to manufacturers.

The new pollution standard only allows the sales of cars meeting those stricter exhaust controls in 17 cities and provinces from July 1. Dealers in those provinces offered steep discounts to clear their inventories of older cars, which could only be registered through the end of the month. That means it’s a temporary blip, car industry officials say.

“The June sales were up, but it doesn’t mean the auto market is warming again,” Cui Dongshu, secretary of the CPCA, told local reporters (link in Chinese). Last year China’s car sales declined 2.8% to 28.08 million (paywall).

Electric vehicle sales, meanwhile, benefited in June from a different policy change.

At the close of June, China cut government subsidies to manufacturers by half on average for electric and hybrid vehicles. The cut was announced earlier, which likely led buyers to move up purchases in case car makers decided to raise prices.

Electric passenger cars saw sales of 134,000 units, around 80% higher than last June’s, data from CPCA showed earlier this week (July 8), compared to just 5% growth in May. The EV market as a whole saw growth of 80% from a year earlier, reviving from 2% in May.

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