China's car makers dazzle abroad but are collapsing at home

what happened

WSJ reporters describe how Chinese carmakers are losing their home market while pushing hard into Europe. Through September, Chinese buyers purchased about 22% fewer passenger vehicles than a year earlier. An industry group head now expects full-year sales of only 18.5 million vehicles, the weakest since 2014.

The root problem is overcapacity. According to Mobility Global, Chinese plants can make about 63 million light vehicles a year, more than triple the expected sales. Local governments that backed their own champions are reluctant to accept failure, so the shakeout is slow. The industry's profit margin fell to a multiyear low of 3.6% in the first eight months, per the China Passenger Car Association.

why it matters

For markets this points to a deepening price war and possible failures that could hit Chinese and European carmakers alike. Volkswagen and BMW are already cutting jobs, and profit pressure in Europe is rising as Chinese brands gain share.

market impact

European carmakers: rising Chinese brand share pressures profits and sales

• ▼Volkswagen pressure down — stronger competition from Chinese brands and falling profits in its largest market
• ▼BMW pressure down — profit warning driven by accelerating sales declines in China

instruments