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China’s vehicle sales suffered their worst monthly decline in almost seven years in September, as the world’s largest auto market took a hit from sluggish economic activity and escalating trade war.

The China Association of Automobile Manufacturers (CAAM), the country’s major auto industry body, stated on Friday that vehicles sales dropped for the third straight month in September to 2.39 million units due to slow economic growth, deleveraging, and tough pollution crackdown.

Analysts have expected the market to weaken this year for first time in decades. CAAM also said its full-year growth forecast of a 3 percent rise would not be met, although the market should avoid a sales loss. Sales climbed 3 percent in 2017, but sharply declined from a 13.7 percent increase in 2016.

The International Monetary Fund also revised China’s growth expectations for 2019 from 6.4 percent to 6.2 percent.

The latest drop is the largest to date since a 26.4 percent decline in January 2012, which was partly due to the timing of the China New Year holiday that year.

For the first nine months of the year, sales totaled 20.49 million vehicles, adding 1.5 percent from the same period a year ago.

The downturn in September vehicle sales follows a 3.8 percent slump in August and a 4.0 percent fall in July. Auto sales posted a 4.8 percent rise in June.

Bumpy Ride Ahead

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The slump in sales emphasizes how global auto firm, from General Motors Co., Toyota Motor Corp., are in for a bumpy ride at a time when they are increasingly hoping for China to become a driver of growth.

GM, one of the most successful international carmakers in China for decades, reported earlier this month that its September sales ended with a sharp 14.9 percent slump from the previous year.

Auto groups Volkswagen AG and Ford Motor Co. also saw their September sales slipped 10.5 percent and 43 percent respectively.   

It also shows the impact of the China-US trade war, with the auto industry among the sectors significantly affected by tariffs.

China’s economic weakness has seen the domestic stock markets slip and the country’s factory sector stall in the previous month after over a year of expansion.

Beijing, worried about the slowdown, has already opened the taps to increase liquidity in the market.

Amid a sluggish economic expansion, a group of Chinese car dealers is feeling the contraction and is pushing for government support to revive growth as fear rises over the possibility of the market experiencing its first annual sales slide in decades.

If sales actually fall this year, it would be a watershed moment for the industry, according to head of a Shanghai-based consultancy Yale Zhang.

Zhang stated that the latest results left some automakers and suppliers in distraught as they have seen the market constantly growing every year for more than 20 years.

They do not know what to do and they are concerned about survival, he said.

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