Features
18 Mar 20

COVID-19: Biggest car sales drop ever in China

Click here to follow our full COVID-19 coverage or click on the editorial tag below the title.

Car sales in China have been declining for 20 months in a row now, but never as dramatically as it was the case in February 2020. The staggering 79,1% drop compared to February 2019, is obviously due to the coronavirus outbreak, but is likely to disrupt more than Chinese sales figures only.

Chinese Detroit

Wuhan, the capital of the Hubei Province, is knows as China’s motor city. GM, Honda, Nissan, Peugeot Group and Renault have production facilities in the virus-affected area, good for 2.24 million vehicles or 10% of the country’s annual car-making capacity. Honda, heavily impacted by the production stop, manufactures 50% of its Chinese vehicles in Wuhan and expects a difficult return-to-normal.

Ripple effect

The effect of the coronavirus extends beyond Hubei province. Tesla has postponed the production date of its Model 3 in Shanghai, whilst Volkswagen is doing the same across all its Chinese plants. In addition, as many parts manufacturers have interrupted production and consequently distribution of parts, it will affect car manufacturing across the world. Hyundai and Kia have already stopped several production lines in South-Korea and Nissan announced a suspension of car production in Japan (source: World Economic Forum).

Car sales and promotion are also impacted. Dealer visits across China were at a historic low, whilst online sales were unable to cope for missing showroom traffic. China’s annual motor show in Beijing, scheduled for 21st of April, is also postponed, which is another hit for OEMs and a missed opportunity for car sales.

2020 projections

China needs to sell roughly 2 million cars per month to match 2019 sales figures. The China Association of Automobile Manufacturers (CAAM) anticipates a 10% drop in the first half of the year and 5% full-year sales drop for 2020, at the condition that the outbreak is fully contained by April 2020.

The coronavirus comes on top of disappointing performance in 2019 (25.77 million units, 8.2% down from 2018). Due to the bad results, Changan Ford Automobile had already announced lay-offs and PSA announced an exit from its joint-venture from (again) Changan. This was back in pre-virus January 2020, when industry experts were still announcing a revival for the year.

Little good is to be expected in terms of car sales across the globe and manufacturers without a decent war chest – e.g. the smaller EV start-ups – might have to take a painful hit before year end.

Picture Credit: Shutterstock

Authored by: Yves Helven