Government subsidies of $280 to $420 provide limited support to the industry.
Increasing headwinds from the coronavirus outbreak can prolong and worsen the impact on China’s vehicle sales, leading to an 18.4% contraction in 2020, according to a Fitch Solutions report.
The report added that there have been delays in vehicle purchasing as households and companies prioritise making improvements on cash reserves and reducing debts.
As consumer spending and business investment takes longer to recover from the outbreak, the car market is expected to see just 21.02 million units sold by year-end. China’s GDP growth outlook in 2020 also dipped by 1 percentage point (ppt) to 4.2%, down from a 5.2% growth.
Fitch also highlights that whilst the Chinese government has announced its intention to support the vehicle market, this will be limited in scope and will fall short. Cities in the Hunan and Guangdong provinces announced relatively low cash subsidies for locally built vehicles ranging from $280 to $420. The government continues to focus on other sectors such as infrastructure, SMEs, and the rest of the industrial sectors.
However, the report noted that vehicle sales would likely bounce back in 2021 as consumers and businesses struggle financially in the aftermath of the outbreak. The risk of a second outbreak will also keep consumers from spending on non-essential goods.
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