At a time when global auto sales are grinding to what feels like inevitable prolonged recession, the world is taking many of its industry cues from China. Which is why it is notable that Ford’s China JV would be laying off “thousands” of workers according to the NYT.
Thousands of the JV’s 20,000 total workers are expected to be laid off as a result of weak auto sales in the world’s second largest economy – a sign of continuing weakness for autos (and the overall economy) heading into the second quarter of 2019. Layoffs recently “quietly begun”, according to additional reporting from Reuters. Neither Ford nor its China JV, formed in partnership with Changan Automobile Group, had a comment on the reported layoffs Wednesday morning.
Car sales in China continued their relentless descent in January, falling 17.7%, as we recently expected would happen when discussing Europe’s tumbling January auto sales. This follows the country’s first full year slump (2018) in more than two decades and it puts further pressure on the state of the global automotive market.
The drop marked the eighth monthly retail sales decline in a row and was the biggest one-month drop in seven years. Gu Yatao, a Beijing-based auto analyst with Roland Berger, confirmed to Bloomberg that the “downward pressure is still there. The government isn’t adopting stimulating policies to give the market a shot in the arm.”
The contraction in China comes at the same time that auto markets in Europe and North America continue to shrink as a result of car sharing services and slowing economies. As we have been reporting for months, the slowdown in China continues to be a result of the country’s slowing economy, coupled with the lagging trade war with the United States. Even discounts for the Chinese New Year, which traditionally can help spur sales, weren’t enough to keep consumers in showrooms early this year.
It’s a “historic slump” for China: the wholesale decline in January, to 2.02 million units, accelerated from December’s 15.8% slump. For 2018, the drop was 4.1%, marking the first decrease since the early 1990s.
Back in early February we reported that automakers had started off 2019 with absolutely abhorrent sales numbers in the U.S., as well. Ford at the time – which no longer reports official monthly sales numbers, just like GM – was the one exception, rising 7% versus estimates of -1.5%, according to Bloomberg who cited “people familiar”. GM, on the other hand, fell 7% versus estimates of -3.7%.
Japanese car giants Nissan and Toyota also both posted losses that were larger than expected and companies like Fiat Chrysler and Honda saw their meek gains falling below expectations. As was expected – and stop us if you’ve heard this one before – most companies wound up blaming the cold weather. Honda got creative and also blamed the government shutdown.
The results also indicated that the annualized industry sales rate has slowed more than estimated.