Has China Reached Peak Automobile?

Is the world’s largest automotive market experiencing its first setback in decades? Total vehicle sales in China dropped by almost 12 percent in September for the third month in a row, according to Bloomberg. Car sales for the first nine months of 2018 reached over 20 million vehicles, around 1.14 percent more than the same period in the previous year, and are likely to miss the China Association of Automobile Manufacturers’ (CAAM) forecast of a three percent annual sales increase.

Together with the drop in car sales, production has slowed down as well. Bearing in mind China’s economic deceleration, serious urban traffic congestion and increasing gas prices, it is understandable that vehicle numbers in China cannot continue growing at the same pace. However, some car market segments seem not to be affected by the overall sales decrease. For example, BMW sales jumped more than 20 percent while sales of new environmentally-friendly vehicles (electric battery cars and plug-in electric hybrid vehicles) increased over 50 percent last month compared to September 2017. This likely indicates that China’s automotive market is maturing and luxury and electric cars are becoming a more noticeable trend, even though overall vehicle demand might not see a rebound anytime soon.