China Car Sales Drop Record 80% as Virus Empties Showrooms

(Bloomberg) — China’s car sales had the biggest monthly plunge on record as the coronavirus kept shoppers away, intensifying pressure on automakers already battling an unprecedented slump before the outbreak.

Sales fell 80% in February, according to preliminary numbers from the China Passenger Car Association (CPCA) released Wednesday. Average daily sales improved toward the end of the month compared with the first three weeks, the CPCA said.

The epidemic has paralyzed the industry just as it was preparing to gradually halt a two-year decline. Now manufacturers are left with little visibility into when sales might recover. Automakers have poured billions of dollars into the world’s largest car market over the past few decades betting on its growth potential.

Vehicle producers ranging from market leader Volkswagen AG and electric-car maker Tesla Inc. to smaller local contenders have been pummeled as the spreading Covid-19 epidemic and efforts to control it hit demand and production. Sales from carmakers to dealerships probably plunged 86% in February, the CPCA said.

Millions of companies in China are in peril as consumers stay home and output at factories remains disrupted. Activity in the country’s manufacturing sector contracted sharply in February, with the official gauge plunging to the lowest level on record.

Even though the central government has stressed the car industry’s importance, it has yet to unveil fresh support measures. Local authorities, which are running against the clock to meet annual economic goals, have started to put in place their own incentive plans to stimulate demand.

The southern city of Foshan this month began providing rebates of as much as 3,000 yuan ($430) to car buyers. Guangzhou’s municipal government will give 10,000 yuan to new-energy vehicle buyers, while a development zone in the city of Xiangtan, Hunan province, started offering 3,000 yuan to those purchasing locally made Zhejiang Geely Holding Group Co. vehicles.

With a slowing economy and widening fiscal gap, the central government has limited options for spurring car sales. Its probable choices include reducing the 10% car-purchase tax, easing congestion-related purchase bans and offering incentives for rural residents to buy new-energy vehicles, according to Cui Dongshu, CPCA secretary general.