"Carmakers have had a good past year or two," said Ben Kwong, chief operating officer at KGI Securities. But now, auto sales "have created a lot of social problems, such as air pollution and traffic congestion, so I think government policy is less friendly than before," he said.
China's government has been pushing the auto industry as a key growth sector, but now it's grappling with social problems that come with heavy car ownership.
Chinese carmakers led the decline. Dongfeng Motor Group., which operates a joint venture with Nissan Motor Co., tumbled 8.9 percent on the Hong Kong stock exchange. Geely Automobile Holdings, which bought Sweden's Volvo Cars from Ford Motor Co. earlier this year and is also listed in Hong Kong, dropped 6.3 percent. Shanghai Automotive Industry Corp., which has joint ventures with General Motors and Volkswagen, fell 1.7 percent in Shanghai.
Korean and Japanese automakers also lost ground. Hyundai Motor Co. tumbled 2.2 percent. Nissan, Honda Motor Co. and Toyota Motor Corp. also dipped.
Hong Kong's Hang Seng Index fell 0.2 percent to 22,845.9, the Shanghai Composite index declined 0.5 percent to 2,842.46 and South Korea's Kospi slipped 0.3 percent to 2,031.25.
The Nikkei 225 stock average lost 0.6 percent to 10,281.13, reopening after a national holiday Thursday. A stronger yen weighed on Japanese exporters, with Sony Corp. off 0.2 percent. The dollar fell under the 83-yen line overnight and was trading around the 83-yen level.
Sentiment was lackluster across the region as many markets around the world headed into the Christmas holidays.
"Investors prefer to stay on the sidelines for the time being, waiting for fund managers to come back from holidays in the beginning of next year," Kwong said.
Key indexes in India, Australia, New Zealand and Taiwan also retreated, while Singapore's benchmark advanced.
In New York on Thursday, stocks ended mixed after reports showed small improvements in consumer spending and the job market. The Dow Jones industrial average rose 14 points, or 0.1 percent, to close at 11,573.49.
The U.S. Commerce Department reported that consumer spending rose 0.4 percent in November from the month before. In a separate report, the Labor Department said the number of people applying for unemployment benefits for the first time dropped by 3,000 last week to 420,000.
The broader Standard & Poor's 500 index fell 2.07, or 0.2 percent, to 1,256.77. The Nasdaq composite index fell 5.88, or 0.2 percent, to 2,665.60.
In currencies, the dollar was trading at 83.01 yen from 82.95 late Thursday. The euro stood at $1.3127 from $1.3114.
Benchmark oil for February delivery rose 90 cents to $91.38 as the positive U.S. economic news helped push up the price to its highest level in more than two years.
