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Business trends

China's car brands suffer most as auto sales slump

Annual tally looks certain to mark first decline in 28 years

Dongfeng Motor's sales of its own brands dropped 17% in the January-October period. (Photo by Shunsuke Tabeta)

BEIJING -- Car sales in China continued to decline in November, placing them on course to mark their first annual decline in 28 years as homegrown brands from state-owned manufacturers struggle to compete with foreign rivals. 

New-auto sales dropped 13.9% on the year to 2,547,800 units in November, falling for five months in a row, the China Association of Automobile Manufacturers said Tuesday. Cumulative sales from January are down 1.7% on the year.

The association publicly acknowledged for the first time that the full-year figure is likely to decline. It projects a 3% drop from 2017, an official said. An annual contraction would be the first since 1990, according to Chinese media.

As the world's largest auto market ages out of its period of rapid expansion, consumers are becoming more selective.

Passenger vehicle sales fell 16.1% in November to 2.17 million units, dragged down by an 18% drop by sport utility vehicles, which had driven growth earlier. Commercial vehicles fared better in comparison, rising 1.7% to 370,000.

State-owned enterprises Dongfeng Motor Group and BAIC Motor suffered declines of 17% and 11%, respectively, in the January-October period for sales of their own brands. The figures exclude those produced at joint ventures with foreign automakers.

Dongfeng has a tough time attracting consumers "even when features like car navigation systems are offered for free," said a dealer in Shenzhen.

One reason for the domestic brands' poor performance is price cuts by foreign rivals looking to boost sales volume. As the more established brands from abroad become more affordable, the appeal of homegrown vehicles touting low prices has diminished.

Hyundai Motor and other foreign manufacturers have slashed prices 10%-15%, rolling out models selling for less than 100,000 yuan ($14,500) in direct competition with cheaper local brands.

The slowdown in the Chinese economy is another factor, squeezing the purchasing power of lower and middle-class cohorts -- the target customers of the Chinese brands.

Private-sector Chinese carmaker Great Wall Motor suffered a 40% plunge of sales in its luxury Wey model in November. Wey dealerships in Beijing have launched a promotion to pay air fare and highway tolls for customers in an attempt to draw people from outside the city, with little success so far.

Some private-sector Chinese automakers are thriving. Zhejiang Geely Holding Group boosted sales volume by 29% for January-November. Geely cars are used widely as government vehicles thanks to the company's closeness with President Xi Jinping, who was once the Communist Party chief in Zhejiang Province. Manufacturing and design techniques absorbed from Swedish luxury car unit Volvo Cars have helped improve reputation of Geely products as well.

Luxury brands, many of which are imported, fare well in general. Toyota Motor's high-end Lexus sales jumped 24% for the January-November period, helped when China cut import tariffs on passenger cars to 15% from 25% in July. Toyota's overall sales in China increased 14% for the period.

Germany's Daimler, the owner of Mercedes-Benz, logged an 11% rise in sales for January-November. Volvo Cars enjoyed 14% growth in sales over the same period.

Sales are strong at manufacturers of new-energy vehicles. BYD, the Chinese leader in the field, saw more than 20% growth in sales for the January-November period. As Beijing pushes for a shift to electrified vehicles, new-energy vehicle sales in the country have reached 1.03 million during the period, already exceeding 1 million mark on an annual basis for the first time.

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