China’s worst car-market slump in a generation is forcing manufacturers and dealers to resort to generous discounts and loan offers to lure buyers, as the slowdown hits automakers’ profits.

Incentives and reductions equivalent to or more than 10 per cent of the sticker price are now commonplace with interest-free loan offers abound as car-makers and dealerships struggle to attract buyers, especially outside China’s cities. However, buyers aren’t biting, as car sales continue to decline this year after the first annual drop in over two decades.

Consumers are shunning big-ticket purchases like cars as the world’s second-largest economy slows and the trade war with the US weighs on stock prices and consumers’ spending power. The heavy discounting threatens to put further strain on automakers’ finances, potentially foreboding job cuts and mergers among the industry’s hundreds of manufacturers.

“2019 should be a year of the survival of the fittest and we may see more merger and reorganization cases in the auto industry,” Shi Jianhua, a deputy secretary general of China Association of Automobile Manufacturers, said at a conference in January.

Locals exposed

Smaller Chinese manufacturers may be more exposed than global companies. Customers for cheaper Chinese brands tend to be consumers who live in smaller cities and are often considering buying their first car — are more easily affected by the slowing economy. “The sales slump is adding more pressure on Chinese brands,” said Cui Dongshu, secretary general of the China Passenger Car Association. “The speed of the industry reshuffle will be accelerated.”

Local companies including Chongqing Changan Automobile Co, Brilliance China Automotive Holdings Ltd and the BAIC Motor Corp. have seen their stock prices plunge by half or more in the past year as the slowdown has hit sales volumes and earnings. BAIC Motor lost 4.3 per cent on Monday, the biggest drop since December 18.

Still, global brands are also facing headwinds. Hyundai Motor Co and Jaguar Land Rover parent Tata Motors Ltd slumped to quarterly losses, citing China woes. Suzuki Motor Corp pulled out of China last year.