China car sales fall for the first time this century

Chinese car sales have dropped for the first time since 1990 as an economic slowdown and the ongoing trade war with the US take their toll.

China is the world’s largest vehicle market and sales of passenger cars fell by 4.1% in 2018 to 23.8m according to the country's largest industry group, the Association of Automobile Manufacturers (CAAM).

December sales fell 13% when compared to the same period one year ago. The fall marked the sixth month of declines in vehicle demand in the world's second-largest economy and according to the Financial Times, China’s three-decade run of growth could be coming to an end.

Indeed, the Financial Times reported that analysts expect the chill in the Chinese car market to continue for at least another six months.

Nevertheless, wealthier consumers have been relatively unaffected by the economic slowdown, with high-end brands such as BMW, Mercedes and Ferrari continuing to see strong growth.

China’s economic slowdown and the ensuing drop in demand for vehicles will unavoidably have a negative effect on carmakers including in Europe.

Thus, commenting on the recent string of weak economic data out of Germany, on Monday morning analysts at Bank of America-Merrill Lynch told clients: "The car sector is going through lots of change, and the Damocles sword of US tariffs can still drop. A rise in US tariffs to 25% could be worth 0.6% of German GDP without any second round effects. And then there is China. We will not tire of reiterating how important Chinese demand has become to Germany.

"The slowdown in China alone can explain c 20bp less GDP growth in Germany compared to 2017. An additional 10bp are part of our base case. The negative spillover can grow quickly if Chinese policy stimulus doesn't stabilise around spring time."