China’s car market will continue to see sluggish sales in 2019, with zero growth predicted for the first time in three decades, and carmakers should get prepared for the downturn that will be complicated by lower tariffs on imported vehicles, industry representatives said. The sales volume of passenger cars in the Chinese market is expected to reach 23.6 million units in 2019, the same number that were sold in 2018, the China Association of Automobile Manufacturers (CAAM) said at an industry meeting in Changsha, Hunan province. Overall vehicle sales in 2019 are expected to reach 28 million units, matching the volume of 2018.

“This is the first time in almost 30 years that China’s car market will see zero growth,” Jia Xinguang, Executive Director at the China Automobile Dealers Association (CADA), told the Global Times. “In November, domestic auto sales dropped for the fifth month in a row and this downturn will continue in 2019, but not many automakers are well prepared for it,” he said. Sales have been trending downward since July. Slowing economic growth, a lack of consumption incentives and tightened car buying restrictions have hindered the growth of the domestic auto market, industry representatives noted. “2019 might be even more difficult for automakers. CAAM has not come up with the worst scenario yet. Overall car sales may see annual declines next year,” Mei Songlin, Vice President and Managing Director of China Operations at JD Power said.

In the first 11 months of the year, total sales fell 1.7% from the same period a year earlier, to 25.42 million vehicles. Sales declined 13.9% year-on-year to 2.55 million units in November. Sedans, multi-purpose vehicles (MPVs) and sports-utility vehicles (SUVs) all fell in November compared with the same month last year. Sales of passenger cars dropped 16.1% to 2.17 million units in November, but sales of commercial vehicles climbed 1.7% to 374,000 units. Sedan sales were down 11.9% at 1.07 million vehicles. Sales of SUVs, usually the industry’s brightest spot, shrank 18.1% to 909,000 units, while those of MPVs declined 30.8% to 150,000 units.

Although China has agreed to lower tariffs on imported vehicles as part of its efforts to further open up its market to foreign companies, the volume of imported cars is still very limited, and foreign car dealers should also prepare for a tepid market, JD Power’s Mei noted. 

hina has already lowered the 20% to 25% tariffs on imported cars to 15%, the Xinhua News Agency reported in July. To ease China-U.S. trade tensions, China announced last week it will temporarily stop imposing 25% and 5% tariffs on U.S.-made cars and components for three months starting from January 1, 2019. “Those moves may unleash some momentum for the car market, which could help boost overall sales volume,” Mei added. China’s car market still has room to grow, as vehicle ownership per capita was 131 units in 2016, far behind other countries such as the U.S. and Japan, where the vehicle ownership per capita was 834 and 611, industry consultancy chyxx.com said in a report released in January. Purchase restrictions in China peg the peak ownership ratio at 400 units.

While sales of gasoline-powered passenger cars aren’t likely to increase in 2019, sales of new energy vehicles (NEVs) are expected to grow 33.3% next year, to reach 1.6 million units, the Global Times reports. In November, sales of NEVs soared 37.6% to 169,000 units, while production jumped 36.9% to 173,000 units, according to CAAM. Sales of electric vehicles rose 30.3% to 138,000 units while 31,000 plug-in hybrid vehicles were sold last month, a jump of 82.5% from a year earlier. In the first 11 months of this year, NEV sales surged 68% year-on-year to 1.03 million vehicles. Production rose 63.6% year-on-year to about 1.05 million units, the Shanghai Daily adds.