The credit scarcity faced by prospective buyers, trade tensions and the squeeze on consumer spending amidst slowing economic activity are blamed for the slump. If the softness persists, it could be detrimental to the Asian giant’s economy that is highly reliant on the auto industry, which is considered to be a gauge of people’s willingness to spend.
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Worried over the sharp fall in sales, a leading auto dealers’ association in China has asked the government to slash the purchase tax, mainly on passenger vehicles. The dealers expect the relevant ministries to take a favorable stance as they did a couple of years ago. Meanwhile, the cash-strapped dealers and manufacturers are weighing multiple options to bring the sector back on track.
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It’s an undeniable fact that vehicle imports have been hit hard by the US-China trade standoff, hurting the sales of foreign brands, especially in the luxury segment. Some analysts attribute the abrupt slump in sales, after staying steady in the initial months of the year, to the government’s crackdown on China’s parallel lending system following the detection of gross mismanagement and defaults.
The private lending groups, commonly called peer-to-peer platforms, had cropped up everywhere after the authorities legalized the system a few years ago. With many of the lending platforms out of business now, demand for new vehicles plunged due to restricted loan availability. Adding to the woes, the government is planning additional measures to regulate the private lending scenario.
China’s car market is also bearing the brunt of the stricter pollution norms being imposed by regulatory agencies across the world.
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