China's Slumping Auto Sales Drag Down Economy; Officials Roll Out Consumption Expansion Plans

(CNA Beijing, June 23) China's rapidly declining domestic auto sales have significantly dragged down overall consumption. China's Ministry of Commerce and other departments today issued two notices to promote the expansion of auto consumption across the entire value chain.

Retail sales of consumer goods in China in May fell 0.6% year-on-year, marking the first negative growth in three and a half years. Auto sales alone dropped by 16.1%, contributing significantly to the decline. Excluding automobiles, retail sales of consumer goods increased by 1.1% year-on-year.

According to auto sales data released in August by the China Passenger Car Association, national passenger car retail sales in May were 1.51 million units, a year-on-year decrease of 22.1%. Cumulative retail sales for the year to date reached 7.099 million units, down 19.5% year-on-year.

The larger decline in sales volume compared to sales value indicates severe "involution" (excessive competition) in China's auto industry, where continuous price reductions have failed to reverse the trend of declining sales.

According to media reports, China's Ministry of Commerce and other departments today issued two notices to expand auto consumption.

One notice announced 40 pilot cities for auto circulation consumption reform and their key reform and innovation directions. For example, Tianjin will focus on auto modification, classic cars, and auto racing; Shenyang in Liaoning will focus on used car circulation; Yangzhou in Jiangsu will focus on RV camping; and Weinan in Shaanxi will focus on scrap car recycling and utilization.

The notice requires each pilot city to improve reform and innovation measures, cultivate new scenarios, new business formats, and new models for auto consumption, and promote integrated development of business, tourism, culture, sports, and health, based on local industrial characteristics, market conditions, resource endowments, locational advantages, and functional positioning, addressing bottlenecks such as unreasonable restrictions on auto circulation consumption.

The other notice concerns several measures to cultivate and expand the auto aftermarket (referring to the series of services and transactions after a vehicle is sold), including 17 measures in six areas: developing auto modification, supporting the RV camping industry, cultivating new business formats for classic cars, optimizing the supply of auto repair and insurance services, actively developing auto racing sports, and promoting innovative and integrated development of auto leasing.

At a press conference today, Sheng Qiuping, Vice Minister of Commerce, introduced the situation regarding the expansion of auto consumption across the entire value chain, stating that the auto industry is a pillar industry and an important area for expanding consumption, stabilizing investment, and benefiting people's livelihoods. Retail sales of auto products account for about 10% of total retail sales of consumer goods, while the auto industry accounts for about 6% of manufacturing investment, and auto parts account for about 6% of merchandise exports. As of now, China's auto ownership has reached 370 million vehicles.

He said that in recent years, on the basis of becoming the world's largest auto consumer market, China has also achieved first place in new energy vehicle production and sales, first in total auto exports, and first in global sales for Chinese automakers. Automobiles have become a hot spot in the consumer market, a focus for foreign investment, and a highlight of foreign trade. (Editor: Zhou Huiying) 1150623

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