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China's total vehicle market grows 7% in Q1, PV sales up 4.6%




China's total vehicle market expanded 7% in the first quarter and passenger vehicle (PV) sales increased 4.6%, with the PV market in China currently growing on the back of demand for Chinese brands' sport utility vehicles.

IHS Markit perspective

  • Significance: Preliminary data show that China's total vehicle market grew by lower single-digit rates in the first quarter, driven mainly by growth of demand trucks as well as sport utility vehicles (SUVs).
  • Implications: IHS Market's latest forecasts show that China's light-vehicle (LV) sales in 2017 will reach 27.8 million units, up 1.08% year on year (y/y), of which PV sales will hit 23.64 million units, up 2.57% y/y.
  • Outlook: IHS Markit envisages continued competition in China's passenger vehicle market, with a greater influx of SUVs entering as international brands aim to gain back market share from the rapidly rising Chinese brands.

The Chinese vehicle market has witnessed total sales of 2,543,000 units in March, including both passenger vehicles (PVs) and commercial vehicles (CVs), according to the preliminary summary data released by the China Association of Automobile Manufacturers (CAAM). In the month, total vehicle production in China hit 2,604,000 units, marking an increase of 3% year on year (y/y), while sales hit over 2,543,000 units, an increase of 4% y/y. Of these, the PV segment, which includes sedans, sport utility vehicles (SUVs), multi-purpose vehicles (MPVs), and minibuses, saw production reach 1,818,000 units, up 1.8% y/y, while sales reached 2,069,000 units, up 1.7% y/y.

On a year-to-date (YTD) basis (the first quarter), China's production and sales of vehicles rose by single-digit rates. Total vehicle production in the first quarter reached 7,133,000 units, marking an increase of 6.8% y/y, while sales were 7,002,000 units, up 7% y/y, the CAAM states. Within the total, PV production in the first quarter reached 6,107,000 units, up 6.8% y/y, while sales reached 5,948,000 units, up 4.6% y/y.

In March, the volume of vehicles sold with 1.6-litre or smaller displacement engines dropped 0.1% y/y to 1,451,000 units, accounting for 69.2% of the PV market in China. In the first quarter, sales of vehicles with 1.6-litre or smaller displacement engines rose 4.8% y/y to 4,196,000 units, accounting for 70.6% of the PV market.

Commercial vehicles (CV), which include trucks and buses, witnessed a marked improvement with total production of 416,000 units in March, up 10.2% y/y, while sales hit 447,000 units, up 16.2% y/y. In the first quarter, production of CVs hit 1,026,000 units, up 15.2% y/y, while sales reached 1,054,000 units, up 22.9% y/y. The main factor behind the growth in CVs stems from the truck segment, which witnessed double-digit rates of sales and production growth in the period of 30% y/y and 21.4% y/y respectively. Meanwhile, bus production dropped by double-digit rates, although sales increased, according to the preliminary CAAM data.

The new energy vehicle (NEV) segment, which includes pure electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), witnessed a production volume of 33,015 units in March, up 30.9% y/y, while sales reached 31,120 units, up 35.6% y/y. Of these, pure electric vehicle (EV) production volume reached 26,685 units, up 41.8% y/y, while sales reached 25,342 units, up 43.3% y/y. Meanwhile, PHEV production volume dropped 1.1% y/y to 6,330 units and sales increased 9.6% y/y to 5,778 units.

In January–March, China's total NEV production reached 58,317 units, down 7.7% y/y, while sales were 55,929 units, down 9.2% y/y. The main factor was a decline in PHEVs.

In the first quarter, pure EV production reached 47,988 units, up 2.9% y/y, while sales reached 44,333 units, up 4.4% y/y. On a YTD basis, the PHEV segment witnessed a 37.5% y/y drop in production to just 10,329 units, while sales decreased 28.4% y/y to 11,596 units.

Outlook and implications

The Chinese vehicle market is now driven by local consumer demand trends that are significantly less influenced by government policy than previously. In 2016 and 2015, the Chinese government's policy to boost the local vehicle market led to the introduction of a 50% cut in the 10% new-car purchase tax for small-engine vehicles. This came into effect on 1 October 2015 and ran until 31 December 2016. During this period, the PV market witnessed a strong boost and outperformed expectations. On 1 January 2017, the market reverted to a higher tax rate of 7.5% for small-engine vehicles with 1.6-litre or smaller displacement engines, which is still lower than the 10% new-car purchase tax imposed on all vehicles with larger engine displacements, but not enough of a stimulus to significantly bring forward demand. Therefore, the volume of PVs sold with small engines has declined in March, but the demand for Chinese brands' vehicles has continued to rise, as has demand for SUVs. This has led to YTD demand growth for PVs including those with 1.6-litre engines or smaller. Consequently, sales of smaller engine displacement models increased by 4.8% y/y in the first quarter. Sales growth continues to come from local demand for SUVs and for Chinese brands' models following the release in 2016 of a number of new cars tweaked for local tastes and of higher specification than produced in previous years.

Data from the CAAM show that, in March, a total of 2,096,300 PVs were sold in China, marking an increase of 1.7% y/y. Of these, sedan sales reached 990,200 units, down 4.93% y/y, SUV sales hit 832,300 units, up 19.59% y/y, MPV sales reached 199,300 units, down 14.93% y/y, and minibus sales were 74,600 units, down 16.74% y/y. In the first quarter, PV sales reached 5,947,600 units, up 4.63%, marking a slower growth rate than witnessed in the same period last year. Of these, SUV sales hit 2,386,100 units, up 20.9% y/y.

The demand for Chinese brands' models is highlighted in the data, which show that, of the total PVs sold, around 957,000 units were Chinese brands' models, an increase of 7.3% y/y. In the sedan segment, Chinese brands' accounted for 19.9% of the market; however, this represented an overall volume decline of 0.9% y/y. In the SUV segment, sales of Chinese brands' models hit 510,000 units in March, an increase of 30.3% y/y and accounting for 61% of the SUV market. In the first quarter, the market for Chinese SUVs continued to grow, with sales at 1.48 million units, 28.9% y/y and accounting for 62.4% of the segment.

The upcoming Shanghai Motor Show this month promises to be an arena of new and concept SUV models from a host of automakers, as well as NEV start-up companies keen to gain traction in a market that is forecast to witness local production and sales of 30 million units per annum as soon as 2020.

IHS Market's latest forecasts show that light-vehicle (LV) sales in China in 2017 will reach 27.8 million units, up 1.08% y/y, of which PV sales will hit 23.64 million units, up 2.57% y/y. This is a slight downgrade from the previous forecast due to a current slowdown in momentum in the market. Meanwhile, the impact of lower oil prices in 2018 is expected to fuel the market slightly.

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.

About The Author

Ms. Namrita Chow is Principal Analyst at IHS Markit for the China automotive market.

With over a decade in China, she has firsthand knowledge of the market, the players and the many nuances. Her expertise has helped in forecasting trends, whether within the domestic Chinese automotive market or linked to Chinese vehicle exports in other markets. She has authored special reports as well as daily news analysis, focusing on the intricacies of the vehicle market in China and is available to speak on subjects relating to the Chinese vehicle market. Ms. Chow’s education includes a Post Graduate Certificate in Economics and Math and a Master of Science degree in Advanced Macroeconomics and Mathematics from the University of London, U.K., as well as two years of intensive Mandarin at Shanghai Jiao Tong University, Shanghai, China.​