Wires

UPDATE 2-Auto industry cautious as China starts 2020 with 2% sales decline forecast

Yilei Sun and Brenda Goh

forecast@

* China's top industry assoc forecasts 2% fall in 2020 sales

* China's auto sales fell 8.2% in 2019 -CAAM

* Sales recovery in lower-tier cities may temper decline -analyst

* For a graphic on China's auto sales, click here https://tmsnrt.rs/2FxwQUh (Adds industry association's 2020 forecast confirmation, 2019 sales figures)

BEIJING/SHANGHAI, Jan 13 (Reuters) - China's auto market is likely to shrink for the third consecutive year in 2020, the country's top auto body said on Monday, with industry watchers hoping a sales recovery in lower-tier cities help ease the pace of decline.

The China Association of Automobile Manufacturers (CAAM) expects a 2% fall in vehicle sales. That would compare with 8.2% last year when sales were pressured by new emission standards in a shrinking economy that was contending with tit-for-tat import tariffs with the United States.

CAAM, affirming its forecast announced last month, also said auto sales declined for the 18th consecutive month in December. Annual sales started falling in 2018, by 2.8%, halting a growth march that started in the 1990s.

"The negative effect of cutting purchase tax in 2015-2017 has disappeared, and car sales in lower-tier cities are expected to recover," said Alan Kang, a senior analyst at LMC Automotive.

"The easing of trade tensions between China and the United States has also helped restore consumer confidence," said Kang, who expects China car sales to grow 0.05% this year.

Sales of new energy vehicles (NEV) sank 27.4% in December, resulting in an overall 4% decline in 2019. China's NEV sales jumped 62% in 2018 but a subsidy cut hurt sales last year.

CAUTIOUS

Global automakers have been cautious with their predictions after cutting production, shutting factories and firing staff last year.

Executives at automakers such as Geely and Ford Motor Co partner Chongqing Changan Automobile Co Ltd have said they expect fiercer competition to weed out weaker players.

On Monday, Ford said its China auto sales slumped more than a quarter in 2019 for its third year of decline. The latest fall, however, was slower than the 37% weathered in 2018, and the automaker said it saw its market share stabilise in the high-to-premium segment.

It remained cautious about 2020, echoing bearish comments on China's market from General Motors Co.

"We expect the market downturn to continue in 2020, and anticipate ongoing headwinds in our China business," Matt Tsien, president of GM China, said last week as the U.S. automaker reported a 15% drop in 2019 China sales.

Volkswagen AG, whose sport-utility vehicles helped it report a smaller 1.1% year-on-year fall in sales in the first 11 months of 2019, has said it expects China's market to grow at a relatively slow pace for the next five years.

The bright spots have been Japan's Toyota Motor Corp and Honda Motor Co Ltd as well as U.S. electric vehicle maker Tesla Inc, which started delivering China-made Model 3 sedans from its $2 billion Shanghai plant this month.

(Reporting by Yilei Sun and Brenda Goh; Editing by Jacqueline Wong and Christopher Cushing)