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Chinese vehicle sales hit 28 mil. units in 2016, up 14% y/y

12 January 2017 IHS Markit Automotive Expert

China's passenger vehicle segment witnessed growth of 15% in 2016, with more than 24 million units sold, while total vehicle sales rose 14% y/y to over 28 million units, summary data from the China Association of Automobile Manufacturers (CAAM) show.

IHS Markit perspective

  • Significance: The Chinese passenger vehicle (PV) market in 2016 was strongly influenced by the presence of the 50% cut in the new-car purchase tax for locally built vehicles with 1.6-litre or smaller engines, which accounted for over 72% of sales in the PV segment.
  • Implications: Chinese brands have been shown to be substantial winners in 2016, as their market share rose to over 58% of the SUV segment.
  • Outlook: IHS Automotive anticipates that 2017 will be a tough year in the Chinese market, with limited growth of around 1% for the light-vehicle segment following a bumper year in 2016.

Total vehicle sales in China reached 28,028,000 units in 2016, marking an increase of 13.7% year on year (y/y), the China Association of Automobile Manufacturers (CAAM) has reported. The summary data released by the CAAM today (12 January) also show that total vehicle production in China last year hit 28,119,000 units, an increase of 14.5% y/y. CAAM data refer to wholesale sales and production of models built and sold in China.

The main pillar of the strong growth in China's vehicle market was the passenger vehicle (PV) segment, which saw sales grow 14.9% y/y to 24.377 million units in 2016. Total PV production in China last year reached 24.42 million units, up 15.5% y/y.

Within the PV segment, sales of sport utility vehicles (SUVs) rose 44.6% y/y to 9.047 million units, while sedan sales hit 12.15 million units, up 3.44% y/y, and multipurpose vehicle (MPV) sales were 2.49 million units, up 18.38% y/y. However, cross-type vehicles, which are basically minibuses, witnessed a 37.8% y/y sales decline to 683,500 units in 2016.

Commercial vehicle (CV) sales in China hit 3.651 million units in 2016, an increase of 5.8% y/y, while production volume rose 8% to 3.68 million units.

The new energy vehicle (NEV) segment witnessed sales of 507,000 units in 2016, up 53% y/y, while production volume reached 517,000 units, up 51.7% y/y. Within these totals, pure electric vehicles (EVs) witnessed sales of 409,000 units, up 65.1% y/y, and a production volume of 417,000 units, up 63.9% y/y. Meanwhile, plug-in hybrid electric vehicle (PHEV) sales reached 98,000 units in 2016, up 17.1% y/y. In the PV segment, pure EV sales reached 257,000 units in 2016, up 75% y/y, while PHEV sales were 79,000 units, up 30.9% y/y.

Outlook and implications

The main reason behind the solid growth in the PV segment in 2016 was the presence of the 50% cut in the new-car purchase tax for locally built vehicles with engines of 1.6 litres or smaller. That tax cut was in place from 1 October 2015 until 31 December 2016, and has now been replaced with a 7.5% new-car purchase tax for these vehicles, which is still lower than the 10% tax for vehicles fitted with engines over 1.6 litres. The government's 'quick fix' tax-cut policy, which was brought in following the market doldrums in summer 2015, has spurred on the Chinese car market, providing a further stimulus to the SUV segment and, in particular, to Chinese brands. Domestic brands have significantly strengthened their product portfolio with the release of a number of new SUVs specifically tailored to local tastes, and generally at a price point below those of international brands present in China. However, as the market competition intensifies, international automakers are bringing in locally produced models pitched at lower price points and tweaked for Chinese consumer tastes.

In 2016, sales of vehicles with 1.6-litre or smaller engines reached 17.6 million units in China, marking an increase of 21.4% y/y and accounting for over 72% of the country's PV market. However, this year the market will face immense pressure to outperform last year's solid growth, but so far the government has stated that no other stimuli are to be introduced this year, apart from the relatively small discount in the new car purchase tax for small engine models.

In 2016, sales by Chinese brands in the country's PV segment hit 10.529 million units, up 20.5% and accounting for around 43.2% of China's PV market. Of this total, Chinese brands' sedan sales hit 2.34 million units, down 3.7% y/y and accounting for 19.3% of the sedan segment. Chinese brands' SUV sales hit 5.268 million units in China in 2016, up 57.6% y/y and accounting for 58.2% of the SUV market in the country. Chinese brands' MPV sales were 2.23 million units, up 19.9% and accounting for 89.6% of the segment.

Automakers have already begun to report solid sales in China in 2016, with Chinese automakers reporting stronger growth rates than their international competitors. Volkswagen (VW) Group sold 3.98 million units in China last year, while General Motors and its joint venture partners sold 3.8 million units in the country. Chinese brand Geely has reported growth of 49% last year and has now raised its sales target to 1 million units for 2017.

For 2017, we forecast that China's light-vehicle market will witness slow growth, with total sales rising by 1% y/y. The high base in 2016 will put pressure on 2017's sales growth. The tax-cut policy brought forward quite a few vehicle sales to 2016 that would otherwise have been made in 2017. However, in 2018, when the complete removal of the tax cut is due, the market is expected to drop without any incentives to prop it up.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.

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