BEIJING (Bloomberg) -- New car registrations in China fell 2.5 percent in July to 1.3 million units, according to the China Passenger Car Association. This is the lowest monthly sales level since February 2014. Data published by another industry organization, the China Association of Automobile Manufacturers, showed passenger-vehicle sales by its members fell 6.6 percent in July, also marking a 17-month low.
The decline comes despite deep price cuts by automakers to woo customers back into showrooms in the world's largest car market.
Foreign automakers, already facing slowing demand in China, now also have to contend with a weaker yuan. A surprise change in approach to currency market intervention by China's Central Bank resulted in an immediate near 2 percent devaluation of the currency today.
"International automakers' cash flow will be impacted, no doubt about it," said Janet Lewis, an auto analyst at Macquarie Group Ltd. "The U.S. automakers would stand to lose the most, because they're the strong currency."
General Motors and Ford Motor didn't immediately respond to e-mailed requests for comment.
Volkswagen Group said it saw limited impact from the currency move because of a "high localization rate" and regional currency hedging.
The decision to devalue is in response to statistics published earlier this month showing a plunge in China's exports, weaker-than-estimated manufacturing output and a slowdown in the rate of credit growth.
China's exports fell 8.3 percent in July, hit by weaker demand from Europe, the U.S. and Japan.
The weaker yuan reduces the value of repatriated profits for foreign carmakers but will improve the competitiveness of China's vehicle exporters in overseas markets. These exports have shrunk in the last two years and were down 14 percent in the first six months of this year.
Chery was the top Chinese car exporter in the year through June, according to the China News Service. "The weakening yuan is good for us," Yin Tongyue, chairman of Chery Auto, said in an interview in Beijing. "We support it."
Other major players poised to gain include Geely and Great Wall, which sell into markets such as Russia, Ukraine, Iran, Egypt, Argentina and Brazil.
In their home market China's carmakers have responded to the slump in sales by discounting, increasing sales incentives and cutting production.
Dealerships are offering incentives at an unprecedented scale to move cars off their parking lots, according to the China Automobile Dealers Association (CADA). Discounts of at least 30 percent are being offered in major cities on hundreds of models, according to Autohome, a popular car-pricing portal. "It is stunning to see how much profit margins dealers are sacrificing in order to sell cars," said Luo Lei, a deputy secretary-general at the CADA. The level of discounting is "shocking," he said.
As well as reducing prices, carmakers and dealers are offering subsidized insurance, zero down-payments, interest-free finance and increased trade in values.
BMW said earlier this month that a sharp slowdown in Chinese demand may force it to revise its profitability goals.
GM reported a 4 percent drop in July deliveries and Ford predicted industrywide sales may decline this year for the first time since 1998.
Others such as Mazda and PSA/Peugeot-Citroen have expressed concern that a price war may break out. Even Great Wall, the biggest SUV maker in China and a beneficiary of the shift in demand to budget models, has not escaped. Its July deliveries slid 1.7 percent.
Reuters contributed to this report