Chinese Car Sales Drop 16%, Could Threaten Global Industry

Chinese car sales fell 16% in January, down to 2.37 million, according to the China Association of Automobile Manufacturers (CAAM). China is the world’s largest car market after it passed the United States a decade ago. Sales in the country are essential to the financial strength of some of the world’s largest car companies.

Among the companies most at risk are Volkswagen and General Motors Co. (NYSE: GM). VW is the market share leader in China at 16%, followed by GM at 14%. No other foreign manufacturers have numbers anywhere close to these. However, China has become the market on which almost every big manufacturer has bet much of its future fortunes.

China’s car sales have become more important as U.S. industry sales have flattened. Last year, car sales in the United States were 17.1 million. Few industry observers believe that 2019 will match that number. Most believe American sales will drop over the next two or three years.

America’s two largest car companies have already drawn investor skepticism. Over the past year, GM’s stock is down 4%. Shares in Ford Motor Co. (NYSE: F) are off 20% during the same period.

Whatever hope that China sales would improve in 2019 has been mostly dashed by its slowing economy and the threat that a trade war with the United States will harm industrial output and consumer spending. China’s middle-class numbers 400 million people, well above the total U.S population of 323 million.

Car companies can leave behind any hopes that 2019 would be a strong year, now that China has posted its January figures.