China car sales drop at steepest pace in almost seven years

By Yilei Sun and Adam Jourdan

BEIJING/SHANGHAI (Reuters) - China's automobile sales fell about 14 percent in November from a year earlier, the country's top auto industry association said, marking the steepest such drop in nearly seven years in the world's largest auto market.

The drop in sales to 2.55 million vehicles, a fifth straight decline in monthly numbers, comes against a backdrop of slowing economic growth and a crippling China-U.S. trade war.

It was the steepest decline since January 2012, when the timing of the Lunar New Year holiday hurt auto sales.

The November drop comes on the heels of almost 12 percent declines in each of the past two months, putting China on track for an annual sales contraction not seen since at least 1990.

Economic shifts, weakness in smaller cities and "international reasons" hurt November sales, the China Association of Automobile Manufacturers (CAAM) said.

The industry body, which has previously cited the impact of a sluggish economy and the U.S.-China trade war for the slowdown in the auto market, forecast annual sales would drop 3 percent.

"We're currently in a painful period, and this process is really tough," Xu Haidong, CAAM assistant secretary general, said at a briefing in Beijing on Tuesday.

China car sales totalled 25.4 million vehicles in the first eleven months of the year, down 1.7 percent from the same period a year earlier, data from the China Association of Automobile Manufacturers (CAAM) showed.

"SURVIVAL OF THE FITTEST"

Hit hard by the slowdown, China's car dealers have urged Beijing to prop up the sector, suggesting that authorities cut the purchase tax on some smaller cars by 50 percent, Reuters reported in October.

China's powerful state planning agency, however, poured cold water on the request and said the slowdown could weed out weaker players in the market.

"This can help us with the survival of the fittest and improve concentration in the industry," said Shi Jianhua, another senior CAAM official, referring to the slowdown.

The downtrend in sales shows how international car makers, from General Motors to Toyota Motor, are in for a rough ride at a time when they are increasingly looking towards the top auto market for growth.

China's car market is also a major employer, driver of economic growth and a barometer of consumers' willingness to buy big-ticket items.

China's auto market grew 3 percent last year, according to CAAM data, but was still sharply down from a 13.7 percent gain in 2016 that was aided by a purchase tax cut on smaller cars.

Sales of new-energy vehicles (NEV), a category comprising electric battery cars and plug-in electric hybrid vehicles, remained robust, increasing 37.6 percent in November.

This was, however, slower from a month earlier.

CAAM said NEV sales would likely hit around 1.6 million units next year. Sales in the first 11 months of 2018 were 1.03 million, up 68 percent year on year.

(Reporting by Yilei Sun in Beijing and Adam Jourdan in Shanghai; Editing by Himani Sarkar and Darren Schuettler)