Auto sales expected to drop 8% this year 
2019-07-04
China’s auto sales are estimated to fall about 8 percent this year due to decreased demand and rising house prices, according to a report by consulting firm AlixPartners.
It forecasts a significant drop compared with 2018 with weak consumer confidence and increased housing costs leaving less money to spend on cars. The company also estimates that overall auto sales in China will increase a little in 2020 compared with 2019. In the long term, the auto market will see a gradual increase, it said.
In terms of short-term market decline, the consulting firm said there were several reasons, including macro-economic factors and weak market sentiment. In small and medium-sized Chinese cities, more disposable income has been diverted to housing from vehicle purchases. 
AlixPartners said house prices had seen a rapid increase in tier 2 to 4 cities in China. Lack of affordability is affecting vehicle sales, especially in cities which have generated the majority of sales growth in the past years.
There was serious overcapacity in China’s auto industry last year and dealer inventory was high. The report noted that auto dealers are facing increasing inventory risks with the overall automotive market slowdown.
Despite the slowing overall market, China’s new-energy vehicle sales growth accelerated in 2018 and is expected to reach 2 million units in 2020. This is powered by government support and improved public charging infrastructure. 
