Foreign and domestic auto makers, habituated to growth in a market where their biggest challenge was building factories quickly enough to meet demand, are hurting. General Motors Co. posted its biggest-ever China sales drop last year and warned of a tough 2020. Ford Motor Co. ’s annual sales fell for the third year in a row, by 26% to 570,000 vehicles—less than half the nearly 1.3 million vehicles it sold at its peak in 2016.
France’s PSA Group, which owns Peugeot, exited a joint venture with a local partner in recent weeks. And Tangshan-based Pangda Automobile Trade Co., once one of China’s biggest dealership chains, went bankrupt last year.
“This is now the new normal,” Volkswagen Group China Chief Executive Stephan Wöllenstein told The Wall Street Journal in November. Other major markets typically see ups and downs in car demand every few years, but China has known only growth for three decades. The slump, he said, is “a new phenomenon in China which nobody was really aware of—that an automotive market also could turn down.”
The downturn has been unfolding for the past year and a half. Beginning around 1990, China’s auto market grew continuously from virtually nothing into a behemoth, eclipsing the U.S. by 2009 and posting many years of double-digit-percentage growth along the way. An expanding middle class fueled demand for new vehicles, prompting foreign auto makers to create joint ventures with locals and invest heavily in building new plants. The total number of cars owned by China’s 1.4 billion citizens reached 260 million last year.