China automakers seek government relief after February sales dive 79% on coronavirus

By Yilei Sun and Brenda Goh
Updated ·3 min read
FILE PHOTO: Woman wearing a face mask rides a shared bicycle on a main road in central Beijing in the morning after the extended Lunar New Year holiday caused by the novel coronavirus outbreak

By Yilei Sun and Brenda Goh

BEIJING/SHANGHAI (Reuters) - Automakers in China are calling on the government to help after industry-wide sales plunged 79% in February to mark their biggest ever monthly decline, with demand pummelled by the coronavirus outbreak.

Their wish list includes cuts to the purchase tax on smaller vehicles, measures to support sales in rural markets and an easing of car emission requirements, the China Association of Automobile Manufacturers (CAAM) said.

February sales in the world's biggest auto market tumbled to 310,000 vehicles from a year earlier, falling for a 20th straight month.

"China's auto sales for February returned to levels not seen since 2005," said Chen Shihua, a senior association official.

For an interactive graphic on China auto sales, please click on https://tmsnrt.rs/2WcKMwa

Sales of new energy vehicles, which include battery-electric cars, contracted for an eighth month in a row, also hurt by a rollback in government subsidies.

CAAM said it is also calling for authorities to extend subsidies for new energy vehicles, ease restrictions on the number of consumers in big cities who purchase the eco-friendly cars and expand investment in infrastructure such as charging stations.

"The government will consider these proposals but it is unlikely they will launch so many policies," said Yale Zhang, head of Shanghai-based consultancy AutoForesight.

"Measures like cuts to the purchase tax, support for rural markets and easing purchase restrictions on new energy vehicles are reasonable and would have an immediate impact," he said.

CAAM said auto sales will 'definitely' rebound in March and should return to normal in the third quarter this year.

An association official told Reuters last month that auto sales are likely to drop by more than 10% for the first half of this year. If the outbreak in China is effectively contained before April, the decline could shrink to around 5% for the whole year, he added.

HUBEI

The association has also asked authorities to improve logistics and support the resumption of production at factories in Hubei, the province where the outbreak began and a major car manufacturing hub responsible for nearly 10% of China's output.

Dongfeng Motor Group Co Ltd <0489.HK> and its partners Honda Motor <7267.T>, Renault SA <RENA.PA> and Peugeot SA <PEUP.PA> have all delayed the restart of production in Hubei.

However, after authorities in Hubei's capital Wuhan lifted restrictions on Wednesday for a few key industries and allowed some people to return to work, Honda resumed limited output at a car plant in the city.

Nissan Motor <7201.T> has also said it plans to partially resume production in Xiangyang, another city in Hubei, as well as its plant in Zhengzhou, Henan.

Outside of Hubei, Tesla's <TSLA.O> production and delivery plans in Shanghai, have also been disrupted.

A CAAM poll showed that production for China's automakers had returned on average to more than 40% of normal output levels.

A drop in auto sales this year would be the third year in a row of declines. Industry-wide auto sales fell 8.2% last year, pressured by new emission standards and trade tensions with the United States.

(Reporting by Yilei Sun and Brenda Goh; Editing by Sayantani Ghosh, Shri Navaratnam and Edwina Gibbs)