China car sales drop as stock market plunges

First Drop For Autos In Two Years

China is taking a one-two punch to the gut as the nation's previously high-flying economy begins to weaken. First, the stock market there is suddenly collapsing after a major boom. Then just as things are looking bad, the auto industry posted its first sales drop in over two years.

According to Bloomberg, citing figures from the China Passenger Car Association, vehicles sales dropped 3.2 percent year-over-year in June to a total of 1.43 million. The last time volume fell was in February 2013. Overall, the industry was still up 8.4 percent from January through June. Analysts predict the automotive downturn to continue into the second half of 2015 due in part to the free-falling stock market.

Since June 12, China's Shanghai Composite is down 32 percent, and the Shenzhen Composite has fallen 41 percent in the same time, according to CNN Money. That has led to huge losses, and so far the country's stocks have given up $3.2 trillion in value since the collapse began. The People's Bank of China has tried cutting interest rates to stem the losses, but so far the strategy hasn't worked.

For the observant, the writing has been on the wall of several months. Late last year, stories emerged about dealers being forced to accept huge inventories from automakers, and that meant only 30 percent of showrooms were making a profit. General Motors might have seen things coming and reacted by slashing prices by up to $8,700 on 40 models from its brands. Even before the crash, the boom was causing people to invest in stocks, rather than buying vehicles.

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