SHANGHAI – China’s new-car sales may have tumbled 80 percent in February from a year earlier as the impact of the coronavirus outbreak spreads, the China Passenger Car Association estimates.
Assembled plants have been idled for weeks, curbing supplies of new cars and light trucks. Many showrooms have been largely quiet with employees and consumers forced to hunker down amid government travel restrictions.
The collapse of the market has prompted dealers, automakers and others to wonder whether Beijing will come to the rescue. But the harsh reality is that even if the government wants to stimulate sales, it lacks the financial resources to do so.
The Chinese government has already spent some 26 billion yuan ($3.8 billion) to help control the viral outbreak. That is a small amount compared with other outlays it has budgeted for the first half of the year.
Beijing is cutting provincial governments’ tax revenue contributions to state coffers by 110 billion yuan from March through June to help local authorities contain the virus.
Excluding the epicenter – Hubei province – the spread of the virus is easing, with the number of daily new infection cases in China dropping to single digits.
But Hubei is still reporting more than 100 new confirmed cases each day, with more than 4,700 severely infected patients, including 1,041 in critical condition, being treated as of Wednesday.
With Hubei under lockdown, Beijing is providing state funds to keep local government agencies and social welfare networks running. The first round of support, 35 billion yuan, was wired to the Hubei government earlier this week, according to China’s ministry of finance.
Despite the epidemic, Beijing intends to stick to a 114 billion yuan plan for 2020 to largely eradicate poverty in China by the year's end.
China’s new-vehicle market has contracted for two straight years. New electrified-vehicle sales have continued to drop after Beijing slashed subsidies for EVs and plug-in hybrids in June, with the goal of winding down an incentive program by the end of this year.
Automakers and dealers have repeatedly pressed Beijing to extend the EV subsidiary program and roll out other tax breaks to help stabilize the market.
But the central government hasn’t responded as it grapples with ballooning epidemic control-related expenditures.
A few cities such as Foshan in the south province of Guangdong and Xiangtan in the central province of Hunan have pledged to offer subsidies up to 3,000 yuan toward a new vehicle.
Guangzhou, another city in Guangdong, plans to subsidize EV sales and vehicle replacement.
But it is hard to see other Chinese cities following suit as they shoulder bigger outlays to counter the epidemic.
Altogether, governments across China have spent 108.8 billion yuan on viral control and prevention as of March 2, with more than two-thirds of the money coming from regional and municipal governments, according to the ministry of finance.
While annual forecasts were mixed before the viral outbreak took hold, the epidemic is dashing any hopes the market will recover in 2020.
And as virus containment efforts drain financial resources from government agencies, automakers and dealers likely will have to tough it out on their own.