Commercial vehicle demand growth in the EU remained on a positive track during April. For the full year 2019, IHS… https://t.co/1a7IZGmvrC
China's new vehicle sales drop almost 12 percent in September
IHS Markit perspective
- Implications: The new vehicle market in China has slowed down in the past few months over the ongoing trade war between the United States and China and the soaring prices of crude oil in the international market.
- Outlook: With the rising costs of ownership, coupled with an increased focus on the development of electric vehicles, autonomous vehicles, and shared mobility services, it is highly likely that people will adopt car sharing without the ownership of a car in future. Total annual NEV production is expected to reach 2.67 million units by 2020 and 6.87 million by 2025, according to IHS Markit's light-vehicle alternative propulsion data. We forecast overall sales of light vehicles in China to increase 1.2% y/y to 28.27 million vehicles in 2018.
The Chinese new vehicle market witnessed a steep decline in sales and production during September, according to the China Association of Automobile Manufacturers (CAAM). Overall, new vehicles sold on a wholesale basis in September decreased 11.6% year on year (y/y) to 2.39 million units. New vehicle production in China last month plunged 11.7% y/y to 2.36 million units.
On a year-to-date (YTD) basis (January-September), the vehicle market in China has risen marginally. Overall, 20.4 million new vehicles were sold in China in the first nine months of 2018, marking an increase of 1.49% y/y, while the production volumes edged up slightly by 0.87% y/y to 20.49 million units.
The passenger vehicle (PV) market in China witnessed sales of 2.06 million units in September, down 12.04% y/y, while production decreased by 11.86% y/y to 2.02 million units. The CAAM definition of PVs includes sedans, sport utility vehicles (SUVs), multi-purpose vehicles (MPVs), and minivans. In the YTD, the PV segment witnessed sales of 17.26 million units, up 0.64% y/y, while production hit 17.35 million units, up 0.13% y/y.
Among the PVs, sales of sedans during September were down 13.38% y/y to 1.005 million units, with YTD sales reaching 8.43 million units, up 1.29% y/y. SUV sales declined 10.1% y/y to 872,800 units in September, with YTD sales of 7.24 million units, up 3.92% y/y. MPVs continued their downward sales trend with 147,000 units sold during September, down 11.4% y/y, and YTD sales dropping 13.1% y/y to 1.26 million units. Sales of minivans were 34,900 units during last month, down 21.9% y/y, and 337,100 units in the YTD, down 19.5% y/y.
Sales of Chinese-branded PVs were 806,400 units in China in September, accounting for 39.1% of total PV sales in the market, while German-branded PVs accounted for 22.5% of the total, with sales of 446,700 units last month. Japanese, US, and South Korean brands sold 413,100 units, 225,900 units, and 111,100 units respectively in September, accounting for 20.1%, 11.0%, and 5.4% of the total PV volume.
Commercial vehicles (CVs), which include all types of trucks, including light, medium and heavy trucks, and buses, witnessed sales of 333,600 units in China in September, down 8.39% y/y, with YTD sales reaching 3.23 million units, up 6.31% y/y. The production volume of CVs was down 10.8% y/y to 314,400 units last month, with YTD production up 5.17% y/y to 3.14 million units. According to a China Daily report, citing the CAAM data, new energy vehicles (NEVs), which include pure battery electric vehicles (BEVs), plug-in hybrid EVs (PHEVs), and fuel-cell vehicles (FCVs), witnessed a sales increase of 54.8% y/y to 121,200 units in September, with sales in the first nine months reaching 721,500 units, up 81.0%y/y.
Outlook and implications
The Chinese auto market has weakened in the past couple of months amid the ongoing trade war between the United States and China. The trade conflict has resulted in a slowing of the economy and dampening of customers' confidence. The increase in prices of imported goods and reduction in export volumes to United States have resulted in a reduction in net disposable income, driving Chinese people to hold back their demand for new vehicles.
The prices of crude oil in international markets have also soared recently, which is driving up the running costs of vehicles, again resulting in consumers postponing their decisions on new vehicle purchases. With the rising costs of ownership, coupled with an increased focus on the development of electric vehicles, autonomous vehicles, and shared mobility services, it is highly likely that people will adopt car sharing without the ownership of a car in future.
Meanwhile, China's new energy vehicle (NEV) sector, despite being small in terms of total volume, has maintained strong growth in 2018. However, among other factors, potential government policy changes have caused uncertainty in this sector. With unprecedented investment coming in, China is mulling stringent rules to curb "redundant development" in the automotive industry. Under the proposed changes, China would implement much stricter rules regulating new investment in the automotive industry, including NEV investment. Under the new rules, existing automakers seeking to expand production capacity for traditionally fuelled vehicles would be required to meet certain standards, such as above-industry capacity utilisation rates and a minimum annual production volume of 300,000 units in the year preceding the application. Total annual NEV production is expected to reach 2.67 million units by 2020 and 6.87 million units by 2025, according to IHS Markit's light-vehicle alternative propulsion data. We forecast overall sales of light vehicles in China to increase 1.2% y/y to 28.27 million vehicles in 2018.
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