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July 8, 2019

Dealer discounting gives China June sales a kick

Discounts ahead of new emissions rules to clear dealer stock spurred passenger car sales in China last month.

By Olly Wehring

Discounts ahead of new emissions rules to clear dealer stock spurred passenger car sales in China last month.

Retail sales rose 4.9% year on year to 1.8m units in June 2019, according to Bloomberg, citing early data from the China Passenger Car Association.

Thus was the first year on year rise since May 2018 in China.

Bloomberg reported a sustained recovery was far from certain after LMC Automotive last month estimated a decline of about 5% for full year 2019.

Inspiring June data was inflated by discounting and it would not be easy for the market to keep up growth, Cui Dongshu, secretary general of PCA, told Bloomberg in Beijing.

Dealers reportedly cut prices by as much as half in recent weeks to clear inventory of cars that didn't meet stricter new emission standards.

Eighteen provinces and regions – which together account for most of China's car sales – required vehicles to meet the new criteria by 1 July.

"Short-term incentives like that boosted sales," Zhu Kongyuan, secretary general of the China Auto Dealers Chamber of Commerce, told Bloomberg ahead of the release of June sales numbers.

"Yet it has also disrupted the market and undermined dealers' profitability, and will have a negative impact on the market in the long run."

LMC said local brands were particularly hard though even market leader Volkswagen had also seen its sales slide, according to LMC. Sales of General Motors Buick and Chevrolet also declined this year to the end of May while Mercedes-Benz, BMW, Honda and Toyota have advanced, according to LMC.

Ford said its Q2 sales in China fell 21.7% to 154,042 vehicles. Compared to the first quarter of 2019, sales of Ford-branded (import and domestic) and Lincoln vehicles increased 24% and 28% respectively.

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