Hyundai-Kia Lead Drop in China Auto Sales; SUV Demand Climbs

  • Hyundai, Kia sales in China suffering from consumer backlash
  • Great Wall posts first monthly decline since September 2014

Hyundai and Kia extended their sales decline in China last month as consumers shunned Korean brands due to geopolitical tensions, while Great Wall Motor posted its first monthly drop in more than two years as competition intensifies in the market’s fastest-growing vehicle segment.

Retail sales of cars, sport utility vehicles and multipurpose vehicles fell 1.7 percent to 1.69 million units in April, data released by China Passenger Car Association on Tuesday show. For the first four months, deliveries slid 1.4 percent to 7.27 million units.

Automakers now face the prospect of slowing sales in the world’s two largest vehicle markets, as rising incentives fail to boost demand in the U.S. and now China. While higher borrowing costs and larger down payments are weighing on American car buyers, the slowdown in China is due in part to politics, said industry consultant Maryann Keller. Chinese consumers are turning away from Korean-branded cars, which accounted for about 5 percent of the market, as part of a consumer backlash against the country’s decision to host the U.S. missile-defense system known as Thaad.

“The Thaad event keeps simmering and slowing the recovery of the market, which was unexpected,” Wu Zeqin, an analyst with Ways Consulting Co. wrote in a note this month. “Patriotic consumers who shun Korean brands are either turning to other brands or postponing their purchases.”

Click here to read more about Hyundai’s China woes.

The fallout could last as long as a year despite possible efforts by the newly elected South Korean president to repair ties with China, said Steve Man, an analyst at Bloomberg Intelligence. A territorial dispute over a group of islands in 2012 between China and Japan resulted in a yearlong decline in sales of Japanese automakers, which lost about 5.5 percentage points in market share during the period, said Man.

Japanese and Chinese car brands are gaining at the expense of Korean marques, with Nissan Motor Co. and Geely Automobile Holdings Ltd. posting better-than-industry gains. Kia Motors Corp.’s China sales fell more than 60 percent to 16,050 units in April, according to a spokesman for its local joint venture.

Segment breakdown:

  • SUV sales rose 15% to 689,387 units
  • Sedan deliveries slid 3.9% to 836,425 units
  • Multipurpose vehicles, or minivans, fell 24% to 135,178 units
  • New-energy vehicle sales of 29,222 units

The upcoming baby boom, after the government eased policy to allow families to have more children, will spur demand for medium and large-sized SUVs, according to the association.

Deliveries at Great Wall Motor Co., China’s biggest SUV maker, fell 8.1 percent last month, the first monthly decline since September 2014. Sales of its best-selling Haval H6 slumped 17 percent amid competition from Geely’s Boyue and Guangzhou Automobile Group Co.’s Trumpchi GS4.

Deliveries of General Motors Co. in China fell 1.9 percent to 272,770 units in April, led by Buick and Chevrolet brands on weaker demand for sedans. Ford Motor Co.’s deliveries rose 11 percent in April on demand for its Edge and Kuga SUVs.

— With assistance by Yan Zhang

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