Automakers have reported mixed results in the Chinese market in April, with some announcing sales gains while overall market growth is slowing.
IHS Markit Perspective:
- Significance: Automakers continue to offer new and refreshed models to gain exposure in the market, as price wars and product differentiation strategies now take centre stage as the fight for market share intensifies.
- Implications: Chinese brands continue to witness higher growth than international brands, but this comes on the back of an increased number of new models in their line-ups. Others that previously had solid growth are now using price cuts to regain lost ground.
- Outlook: Overall the Chinese car market is now expected to witness a slower rate of growth, with the main force coming from the lower-tier cities, where many consumers are now purchasing their first vehicles, but where brand awareness and brand loyalty is still low.
April has been a month of mixed results for automakers in China and these generally show that market forces are at play, with those automakers with products that appeal to local consumer tastes continuing to gain, while others are bearing the brunt of a market showing slower growth.
The trend is shown in April's sales data reported by SAIC Group, including sales from its joint ventures (JVs) with international automakers Volkswagen (VW) and General Motors (GM), as well as SAIC Motor in the passenger vehicle segment and its various other entities in the commercial vehicle sphere. SAIC Group has reported total sales of 501,337 units in April, marking an increase of 5.9% year on year (y/y), and bringing the group's year-to-date (YTD) sales to 2,157,185 units, up 3.66% y/y. However, within the overall growth, the JV with VW is struggling. Sales in the month were down 4.29% y/y to 139,051 units in April, and in the YTD were down 4.62% y/y to 643,078 units. Meanwhile, SAIC-GM, the JV between SAIC and General Motors, has reported gains in April, selling 145,031 units, up from 127,308 units in the same month last year, while on a YTD basis sales were up 5.4% y/y to 574,019 units. The three-way SAIC-GM-Wuling JV (SGMW) has reported a drop in sales in April as well as on a YTD basis. In April, SGMW sold 160,061 units, down from 170,089 units, and on a YTD basis sold 722,977 units, down 1.91% y/y.
However, the main silver lining for SAIC is its own-brand product sales. The SAIC Passenger Vehicle subsidiary sold a total of 41,607 units in April, up from just 17,505 units in the same month of 2016, bringing the YTD sales to 159,528 units, up 118.36% y/y from 73,058 units in the same period last year. SAIC Maxus sales were also up, rising 23.26% y/y in the YTD, while the SAIC Iveco Hongyan JV's sales were up 148.53% y/y.
Meanwhile, other automakers have also reported growth in China in April, with Japanese players reporting good numbers. Honda sold 109,518 units in April, marking an increase of 29.4% y/y, with the sales of its Guangzhou Honda JV up 24% y/y to 54,978 units and the sales of its Dongfeng Honda JV hitting 54,540 units, up 35% y/y. In the first four months of 2017, Honda sold 414,814 units, up 19.8% y/y. For Honda, the two models bringing in the strongest sales growth are the Honda Accord from the GAC-Honda JV and the Honda Civic from Dongfeng Honda.
Toyota has also reported growth, with sales of 108,300 units in the month, up 7.2% y/y, and 404,400 units in the YTD, up 3.1% y/y. The FAW-Toyota JV sold 58,400 units in the month, up 3.4% y/y, and 221,400 units in the YTD, up 4.4% y/y. Meanwhile, the Guangzhou Toyota JV sold 38,300 units in April, up 9.8% y/y, and 140,000 units in January‒April, down 4.6% y/y.
Geely has reported very strong growth in the month with sales of 86,727 units, up 94% y/y. On a YTD basis, Geely's sales reached 365,308 units, up 94% y/y. The models that have brought growth for the automaker in April include the New Emgrand sedan with sales of 18,655 units, up 13% y/y; however, the extremely high growth rates stem from sales of new models introduced late in 2016 or in the early part of this year. In the same month last year, Geely had a much smaller line-up of models on offer and this low base has resulted in the Chinese automaker witnessing these tremendously high growth rates.
Great Wall Motor had a high base level of sales from 2016 and because of this it is now struggling to keep up the growth pace it witnessed in previous years. The automaker has reported sales of 73,171 units in April, down 8.08% y/y, and 327,330 units in the YTD, up 4.57% y/y. This has come on the back of a major price-cutting strategy by the automaker as it tries to gain in a market that is cooling. However, Great Wall aims to gain in the future from the new Wey brand, which it launched at last month's Shanghai Motor Show.
Outlook and implications
The overall trend in April is a Chinese market heavily influenced by local consumer demand and affected by price competition. The current growth segments in China are the lower-tier cities in the interior regions of the country, and in these regions price is of the essence. Lower disposable income levels are evident in these interior regions when compared to the relatively highly developed coastal areas and cities of China, which have in the recent past been the main force behind growth in the housing and vehicle markets. However, now as the growth rates calm in these regions, the main force driving growth is coming from the myriad smaller cities within China's interior where consumers are now purchasing their first new cars. This is likely to once again bring in growth in the sedan segment, as is apparent from the sales of certain brands' sedans. Brand competition for market awareness, however, is high and those automakers that are showcasing refreshed sedan models are gaining market share, as are those which have new sport utility vehicles (SUVs) in their portfolios. The Chinese consumer generally lacks brand loyalty and, therefore, the model that is in the limelight wins consumers. This trend is increasingly difficult for automakers to use to their advantage, other than by constantly announcing refreshed models and tweaking models to show their uniqueness as well as to gain exposure.
The China Passenger Car Association (CPCA) has already reported top-line data for the month, stating that sales were down 1.7% y/y in April. The CPCA, which records retail sales, also states that sales on a YTD basis were down 1.4% y/y in April.
The wholesale data from the China Association of Automobile Manufacturers (CAAM) have yet to be released.
About this article
The above article is from IHS Markit 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.