Volkswagen expects challenging Chinese car market in 2019

Volkswagen is bracing for a continued weak market in China, one of the most important markets for Germany's car industry.

"The market is a challenge," Jochem Heizmann, Volkswagen's chair of China operations and board member, told dpa on Thursday on the sidelines of the Guangzhou auto trade show. "Since June, each month has turned out worse."

No more growth is expected for the overall market in China this year, with Heizmann saying a downturn to the tune of around "1 to 2 per cent" was possible. Growth in China could also fall "flat" in 2019, Heizmann added.

The car market in China, once a guarantor for growth, has contracted for the past several months as consumers stifle their spending in the face of the government's trade war with the United States.

Sales in China for all carmakers fell by 0.1 per cent to just under 22.97 million vehicles in the first 10 months of the year. The drop in sales amounted to 11.7 per cent in October alone, according to China's carmaker association CAAM.

Volkswagen will not achieve its goals set for the year in the current environment. Heizmann said he nevertheless anticipates better development for the German carmaker than in the overall market. "We are growing and expect growth for next year," said Heizmann.

The Volkswagen Group delivered 3.04 million vehicles to customers in China and Hong Kong in the first nine months of the year - 5 per cent more than the same period in 2017.

Volkswagen's figures in October for only China, however, are less rosy: The company sold only 274,100 cars in the country last month - a drop of 9.8 per cent compared to the same time last year. Sales in China for the first nine months of 2018 rose only 0.4 per cent year-on-year to 2.52 million vehicles.

Responding to reports that the Chinese government was thinking about tax relief for car buyers, Heizmann said: "The government should decide that as soon as possible." A clear "yes" or "no" is needed, he said, because buyers might otherwise withhold purchases in anticipation of decreasing tariffs.

In the medium term, Heizmann said he saw great opportunities in China. The country's potential is greater than in any other comparable car market in the world, Heizmann said.