China's auto industry has been trucking along in recent years, proving to be one of the few places U.S. automakers could turn to for reliable profits as a remedy for the logy European market and the slowly recovering American market. 

But with expectations that the growth of the Chinese auto market is hitting the brakes, that could mean leaner times are ahead for American car makers like GM (GM) and Ford Motor Company (F), which have come to rely on China's strong and steady growth to feed its bottom line. 

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The secretary general of the China Association of Automobile Manufacturers, recently said that he expects the Chinese auto industry to grow just 7% in 2014 - nearly half of what it reported for 2013. 

A Vital Market

Automobile manufacturers in China have enjoyed growth that has out clipped the pace of the overall economy during the past few years. But the good times may not roll for long as the auto industry is now being pulled down by the weight of a slowing economy. 

This has been reflected in weak new car sales in China, which fell to only 2.5% in September, a far cry from a record 20% during the same month last year. Meanwhile, passenger car sales tumbled to their lowest since February 2013,  according to a report from the Chinese-language Economic Observer. 

Sales of foreign automobile brands also hit the brakes in September, causing Toyota's joint venture with China FAW Toyota Motor Sales to lower its sales target. At the same time, growth in the sales of business vehicles plummeted to 4% in August from 16% for the same month last year. 

GM and Ford both have a lot riding on the health of the Chinese auto market. GM has a 15.2 percent share of the market, according to analyst group Trefis. GM has set up 10 joint ventures and two wholly-owned subsidiaries in mainland China, where it employees more than 58,000 workers. It imports into China, its Buick, Cadillac, and Chevrolet brands, along with Opel, Po Chun and Wuling. 

Ford is no less dependent on China as it reportedly expects 40% of its revenues to be from its Asia-Pacific-Africa region in just over five years. The company also invested $5 billion in its China operations to increase production capacity. In 2011, the company announced its goal to launch 15 new vehicles by 2015, and have also doubled the number of dealers in the country.

Side Effects of a Slowdown

A potential side effect of the slowdown is that the weaker demand for cars could force car makers to lower the sticker prices on their products.  If GM and Ford maintain their current production rate amid a declining sales atmosphere, that could lead to an oversupply of inventory, which would force prices down and threaten the companies' profits. 

Another foreboding sign for car makers is that the automobile industry in China has a history of reacting poorly to a struggling overall economy. When the financial crisis in September of 2008, car sales in China took their sharpest dive in 17 years, which caused a drop in sales at car makers in U.S., Europe and Japan.  

Ford is already showing signs of slowing down as a result of the lower growth in China. Car sales had been trending downward over the summer for Ford as it reported an increase in sales of 19% and 13% for July and August respectively. This was a far cry from the 62% jump in sales for all of 2013. 

And earlier this month, after two straight years of reporting rising sales in China every month, Ford announced that its September passenger-car sales in fell 4%, compared to the same month last year. 

Third quarter results released just last week show that Ford Asia-Pacific saw its profit fall by $72 million to $44 million from the same quarter last year. However, the Asia-Pacific revenue figures exclude much of Ford's income from China, which is reported separately as equity income from its joint ventures with local Chinese firms.

 The slowing auto industry could be coming at a particularly bad time as both GM and Ford have plans to focus on increasing luxury brand sales in China, which can be a capital intensive project for automakers. Additionally, demand for high-end brands tends to suffer during an economic slowdown as consumers tighten their budgets.

TagsGM China, GM, Ford, Ford China, China’s Decelerating Auto Industry, GM, Ford Could Take a Hit From China’s Decelerating Auto Industry