BEIJING/MUMBAI -- China and India, the world's largest and fourth largest auto markets, both suffered double-digit drops in sales during the previous quarter ended June, putting global sales on track to shrink for the second consecutive year.
China sold 5.94 million new vehicles during the second calendar quarter, according to industry figures released Wednesday, a 13.5% drop from a year earlier. The drop widened by more than 2 points since the first quarter, and Chinese sales have fallen for 12 straight months through June.
The Chinese economic slowdown and a yearlong trade war with the U.S. have dampened the consumer appetite for new cars. In 2018, the Chinese auto market retreated for the first time in 28 years.
China Association of Automobile Manufacturers, which published the sales numbers, said this year's purchases will undershoot 2018's full-year total, downgrading the previous forecast predicting flat growth.
Meanwhile, India's vehicle sales plunged 16.6% during the second quarter, marking a sharp decline from a 1.4% dip in the first quarter. September's default at a major non-bank lender, Infrastructure Leasing and Financial Services, has spurred credit tightening in auto loans. The domestic vehicle market has contracted each month since November.
Among the five largest auto markets in the world, which includes the U.S., Japan and Europe along with India and China, sales stood at roughly 16 million units in the second quarter, representing a 13% slump from a year earlier. Sales have declined for the fourth consecutive quarters, but the April-June quarter was the worst.
This month, British data provider IHS Markit predicted global auto sales will decrease by 2% this year to 91 million units, a downgrade from the gain forecast at the beginning of the year. This would be the first time worldwide sales dipped for two consecutive years since the global financial crisis in 2008 and 2009.
During the second quarter, U.S. auto sales fell 1.5%. Aggregate sales among major European countries shrank for nine months in a row through May. Japan logged growth in the second quarter, but the planned consumption tax hike in October puts the sustainability of that gain in question.
The fortunes of the auto industry are tied to consumption and jobs. In China, the auto sector, including maintenance, accounts for 10% of the gross domestic product. The government subsidizes trade-ins for rural populations, and loosened restrictions on the number of license plates issued in major cities. Those stimulus policies, however, have yet to produce any discernible results.
Some analysts believe the Chinese and U.S. markets will rebound during the second half of the year. China instituted new restrictions on emissions in about half the country on July 1, which will likely spur consumers to purchase vehicles again.
In the U.S., sales are recovering amid lower rates on auto loans. "If the Fed cuts rates, as is widely expected, lower financing costs will provide further support to auto sales," Elaine Buckberg, General Motors chief economist, said this month.
Additional reporting by Shuji Nakayama in New York and Masahisa Yuzawa in Tokyo.