EFEShanghai (China)

China's auto sales declined for an 11th straight month in May as a prolonged downturn in the country's automotive sector showed no sign of easing and the industry braced for losses stemming from new emissions standards, according to a Dow Jones Newswires report made available to EFE on Wednesday.

Sales for the month fell 16.4 percent from the same time a year earlier, to 1.91 million.

Auto makers and dealers face a fresh challenge in the form of new vehicle emission standards due to come into effect on July 1, a year sooner than planned.

Dealers are scrambling to sell their older vehicles before doing so becomes illegal at the end of June, often by offering steep discounts.

While that could deliver a temporary boost in unit sales, it is likely to worsen financial losses for manufacturers and dealer groups already struggling in China, analysts said.

The new regulations will hit an industry already in the midst of a dramatic slowdown. Vehicle sales in the first five months of the year fell 13 percent from a year earlier, the government-backed China Association of Automobile Manufacturers said Wednesday.

Passenger-car sales were down 15.2 percent in the first five months of the year, while sales of commercial vehicles were off by 1.3 percent, the association said.

Electric-vehicle sales continued to grow strongly, however, reaching 464,000 in the January-to-May period, up 41.5 percent year over year. With 104,000 units sold last month, EVs accounted for 5.4 percent of total vehicle sales.

Market saturation in major urban centers and a credit crunch in smaller cities have combined with fragile confidence in the Chinese economy to depress sales since mid-2018. While some analysts forecast a rebound later this year, the new emissions regulations are disrupting the industry's efforts to recover, officials at the manufacturers' association said.

Auto makers have known about the tighter emissions controls for at least five years, but they were taken by surprise when four of Chinese biggest cities and 11 provinces - collectively accounting for two-thirds of China's auto market - decided to implement the rules this July, a year earlier than planned, in response to a central-government campaign to combat air pollution.

The Shanghai authorities only announced their decision to bring implementation forward on April 22, giving auto makers and dealers little time to react. Beijing made its announcement in February.

"Why do we have to implement ahead of time?" said Shi Jianhua, the manufacturers' association's assistant secretary-general. "Look at the slump in sales of Chinese cars. This is hurting the auto industry."

In an open letter to auto makers last month, the Shanghai Automobile Sales Trade Association said 70 percent of dealerships in the city were already losing money.

"Given the sluggish car market, it's impossible for dealerships in Shanghai to sell all their [older] cars within just over a month," it said, "though they are trying their best by selling cars at a loss." The association appealed to car makers to stop delivering noncompliant vehicles to dealers, provide funds to help dealers discount old inventory, and buy back older models.

Dealers were resorting to deep discounts to shift inventory before the looming sales deadline. At a Shanghai auto fair over the weekend, a Mercedes-Benz V-class minivan that doesn't comply with the new emissions standards was available at a $72,300 discount, almost halving its price tag, according to Yicai, a local news site.

A spokesman for Volkswagen AG said that while cars that meet the new standards are already on sale, the company does still have a sizable inventory of older vehicles. He said one way they were reducing that was by delivering the models to regions that won't enact the new standards until July 2020.

The situation facing dealers is grave in some parts of China, said Lang Xuehong, the vice secretary-general of the China Automobile Dealers Association, with up to 80 percent of inventory in some regions contravening the new emission rules. However, the switch to cleaner vehicles is well under way in China's major cities, Lang said.

Shifting regulations have complicated auto makers' efforts to achieve compliance, said Hui He, the China lead at the International Council on Clean Transportation, a U.S. nonprofit research institution. In addition to its new emission standards, China will also implement stringent fuel-efficiency rules for cars in 2020. But the two sets of standards weren't developed in tandem and were announced years apart, He said.

"The two standards were disconnected, so manufacturers didn't have a chance to develop one technology package that could meet both," she said. "This is really bad for the auto makers."