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FEATURE: China’s Apr auto sales jump but 2020 still dire

After witnessing on-year declines for 21 successive months, automotive sales in China finally had a reprieve in April, with sales last month increasing by 4.4% on year to 2.1 million units, according to the latest release from the China Association of Automobile Manufacturers (CAAM) on May 11. The rises were mainly thanks to the delay in demand over the past few months and to government stimulus policies, industry watchers say.
In April alone, auto production rose by 2.3% on year or by 46.6% on month to 2.1 million units, the statistics showed. April’s sales also surged 43.5% on month.

Improved virus situation and supportive policies boost sales

The significant recovery in production and sales of vehicles last month occurred mainly “as China’s battle against COVID-19 made some progress while central and local government authorities presented favourable policies,” Chen Shihua, CAAM’s deputy secretary general, said at a press conference on May 11.

He also pointed out that besides the improved sales, operations at domestic automakers have basically returned to the same level as this time last year.

Starting in February, China’s central and local governments have introduced stimulus policies for auto consumption to boost sales amid the softening industry and unforeseen jolt to the carmakers’ business caused by the worldwide pandemic, Mysteel Global noted.

For example, the Shanghai municipal government is loosening the restrictions on vehicle registration, increasing the number plate quota by 40,000 units by the end of 2020, according to an official press announcement from the Shanghai government towards the end of last month. In the meantime, consumers buying new-energy vehicles (NEVs) are offered a subsidy of Yuan 5,000/unit ($704.5/unit) to offset some of the cost of recharging the batteries, while consumers who scrap older-model conventional combustion engine vehicles conforming to National Emission Standard Stage IV and then purchase new cars complying with the Stage VI Standard can get a subsidy of Yuan 4,000/unit, the government announced.

China has decided to maintain subsidies on NEVs, as Mysteel reported, though the size of stimulus will decline by 10% on year in 2020, and 20% and 30% respectively in 2021 and 2022. In the meantime, the purchase tax exemption on NEVs will stay in place until the end of 2022. 

“We had expected a sharper (on-year) rebound in the April results, but the actual situation is just mediocre,” Xu Haidong, the deputy chief engineer of the association said at the conference. “The sales must include the demand that was restrained in February and March,” he added.

Besides, some producers relying on imported components are still under pressure, market sources said. “Some of the parts we need are imported and the supply has been interrupted by the virus spread, so we have delayed our production schedule. The prices of components have also markedly increased,” an official with a vehicle manufacturer in Shanghai told Mysteel Global.

However, Xu said China’s domestic auto supply had not been severely impacted by the global virus situation so far, as many Chinese manufacturers had inventories of spare parts sufficient for two months’ use at hand and some major components producers abroad have not fully halted operations.

“If the factories in the US and Germany suspend operations for the longer term, the domestic market will obviously feel the influence beginning from late May,” Xu explained. However, he said that overseas factories restarted production from late April and the three major US producers – General Motors, Fiat Chrysler and Ford – might resume operations this month.

Commercial vehicle sales underpin total auto sales

China’s sales and production of commercial vehicles created historical highs in April, with the former up 37.7% on month and 31.6% on year at 534,000 units last month and the latter by 37.8% on month and 31.3% on year at 514,000 units, according to data from CAAM.

Within total commercial-vehicle sales, those of heavy-duty trucks increased the most last month, being up 61% on year at 191,000 units, the statistics showed. Production also surged 48.3% on year to 175,000 units. 

But unlike the healthy sales of commercial vehicles that enterprises procured to help produce profits for their businesses, sales of passenger cars in the retail consumer market are not as good, Mysteel Global noted.

Last month, China’s passenger car sales decreased 2.6% on year to 1.5 million units though they were still up by a sizzling 45.6% on month. Car production also declined 4.6% on year to 1.6 million units last month, though this too was up 49.7% on month, according to CAAM’s statistics.

The declining passenger car sales indicated weakening purchasing power among individual consumers in China, a Beijing-based market insider said. “The widespread COVID-19 situation across the world affected the operations of many sectors,” he told Mysteel Global, adding that the uncertainties in the global economy also shook consumers’ faith back home.

But full-year decline in China’s auto industry seems inevitable

At Monday’s press conference, CAAM officials presented two scenarios for China’s automobile industry for the whole of 2020 based on the worldwide virus situation, but warned that negative growth is inevitable.

If the epidemic overseas is brought under control in Q2, then China’s auto sales are expected to decline 15% on year, the association said. If the effect of the virus persists into the July-September quarter or beyond, sales might decline by a larger 25% on year.

Over January-April, China’s auto sales totalled 5.8 million units, down by 31.1% on year, according to CAAM’s data, while output declined too by 33.4% on year to 5.6 million units.
 
China’s new-energy vehicle industry still faces huge pressure too, Mysteel Global notes. China’s NEV sales and production decreased 26.5% and 22.1% on year to 72,000 units and 80,000 units respectively in April, and over January-April, NEV sales and production dropped 43.4% and 44.8% respectively to 205,000 units both.

Written by Anna Wu, wub@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com