China: Carmakers and Context

Written by: Global Thought Leadership | February 21, 2019

Chart courtesy of Brandywine Global. Sources: CEIC, Macrobond. Data as of 12/31/2018. * United States, Domestic Trade, Vehicle Sales & Registrations, Vehicle Sales, Motor Vehicle Units, Total, SA, AR.  China, Domestic Trade, Vehicle Sales & Registrations, Sales, Total. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.


  • China’s carmakers saw overall production fall by just over -3.1% in 2018 after growing some 13.7% in 2016 and 3.6% in 2017 – thanks in part to issues affecting the industry worldwide. However, the slowdown in China also reflects factors unique to its economy.
  • For example, the lowering of import tariffs as a way of improving overall affordability has paradoxically caused many buyers to put off purchases, hopeful for even larger future cuts. Local stock market volatility, combined with declining affordability of real estate, have pressured overall discretionary spending.
  • Recent analysis by Brandywine Global cites other challenges as well. Cyclical forces included possible market saturation by SUVs, and the longer-term uncertainty of available credit as China changes its policy approach to consumer debt.
  • In terms of structural factors, the burgeoning market for used cars, policy limitations on issuance of licenses for new cars, and the rapid adoption of ride-sharing apps all act to hamper local growth.
  • All this casts doubt on whether China’s industry can take up the slack being felt so painfully in Europe and North America, with Brandywine Global concluding that it’s unlikely the country can be both the buyer of last resort and the globally dominant producer – and that investors may be better served analyzing the issues confronting the global industry than focusing on China alone.


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