There were limited positive developments in the market during February, including the sudden surge of commercial vehicle sales.
IHS Automotive Perspective
Sedan sales continue to tumble despite being the largest segment, accounting for 48% of the passenger vehicle (PV) market in China.
Chinese brands continue to achieve growth in market share, accounting for 60% of sport utility vehicles (SUVs) sold in the year-to-date period, a trend that is unlikely to slow.
The overall vehicle market is slowing, with sales and production of the total market down in February, although on a year-to-date basis the market is still in positive territory.
Total market declines in February
The production and sales of vehicles in China declined in February, data from the China Association of Automobile Manufacturers (CAAM) show. Overall, 1,611,800 vehicles were produced in China in February, down 1.31% year on year (y/y) compared with the corresponding month a year ago. Total vehicle sales in China reached 1,580,900 units in February, a decrease of 0.86% y/y.
Passenger vehicle (PV) sales and production declined in the month. CAAM defines PVs as sedans, sport utility vehicles (SUVs), multi-purpose vehicles (MPVs), and minibuses. Together, total PV production in February reached 1,402,500 units, an annual decrease of 0.83% y/y. PV sales in February amounted to 1,376,700 units, down 1.53% y/y.
Commercial vehicle (CV) sales hit a positive note and were one of the bright spots of the market in the month. Total CV production amounted to 209,400 units in the month, down 4.41% y/y, while CV sales rose to 204,200 units, up 3.90% y/y.
YTD market remains positive
On a year-to-date basis, however, the market remains in positive territory. Total vehicle production and sales in February reached 4,069,100 and 4,086,900 units respectively, up 3.74% and 4.37% y/y. The growth in the market was due to overall growth in the PV segment during the first two months of the year, while overall CV production and sales remained in negative territory.
PV production levels in the first two months increased to 3,558,900 units, up 5.10% y/y. PV sales in the two-month period have hit 3,613,300 units, up 5.11% y/y. However CV production hit 510,300 units in the year-to-date period, down 4.83% y/y with sales of 473,600 units, down 0.96% y/y.
PV market declines 1.53% in February, SUVs continue to achieve growth
The PV market in China declined overall February, with sales of 1.37 million units, down 1.53% y/y and down 38.45% compared with January.
Sedan sales dropped by double digits in the month, with total volume sales of 666,900 units, down 17.58% y/y and down 39.98% month on month (m/m). SUV sales reached 478,900 units, an annual increase of 44.02% y/y, but a monthly decrease of 39.71% compared with January sales. MPV sales totalled 174,400 units in February, up 10.38% y/y, while minibus sales fell to 57,400 units, down 41.99% y/y.
On a year-to-date basis, the total PV market garnered sales of 3.6 million units, up 5.11% y/y. Of this, sedan sales accounted for 1,778,000 units, down 12.46% y/y. SUV sales in the two-month period comprised 1.27 million units, up 54.8% y/y, while MPV sales totalled 435,800 units, up 13.62% y/y. Minibus sales amounted to 128,700 units, down 36.37% y/y.
Outlook and implications
Overall, the market is slowing, with growth rates rapidly declining because of sliding sedan sales in China. Sedans, despite their falling sales, continue to be the main volume segment of vehicle sales in China, accounting for 48.4% of the PV market. However, SUVs are gaining greater market share and now account for 34.7% of the PV market in February. The expansion of the SUV segment continued in the month, with double-digit percentage growth, but volume was down considerably from sales in January.
The SUV segment continues to be the main growth segment for Chinese brands, which are quickly gaining market share in China and simultaneously reducing that of their international partners and competitors.
In the January–February period, the volume of sedans sold from Chinese brands amounted to 362,000 units, comprising 20.4% of the total volume of sedans sales. In the SUV segment, Chinese brand sales accounted for 60% of SUVs sold in the year-to-date period, or 763,000 units. Within the MPV segment, Chinese brand sales totalled 408,000 units, accounting for 93.7% of MPV sales in the two-month period.
However, exports of vehicles from China continued to decline, with Chinese vehicle exports decreasing to 80,000 units in the two-month period, a 29.7% y/y decline. Of this total, PV exports in the year-to-date period declined to 51,000 units, down 22.9%, while CV exports fell to 29,000 units, down 39.1% y/y.
In January, 61,600 vehicles were imported into China, a decline of 38.8% y/y, but still higher than the volume of vehicles exported from China, which declined to 44,400 units in the first month of the year, down 40.3% y/y.
February was the month of the Chinese New Year, thereby reducing the number of working days in an already shorter month. The celebrations and festivities of the Chinese New Year generally account for a weeklong holiday and a subsequent quiet period. March sales will therefore be the main indicator of whether there is a real slowdown in the market.
Most international automakers have already begun reporting drops in sales in February, with local brands reporting growth. SAIC Group, which has joint ventures (JVs) with Volkswagen and General Motors, reported an overall decline due its dependence on vehicles produced and sold by its JVs with the international automakers, although sales of its in-house brands rose, as did other Chinese brands Geely and Great Wall. However, one premium automaker, Mercedes, continues to achieve growth in China.
IHS Automotive has issued a cautious estimate for growth this year, as the government stimulus for small engine vehicles that came into effect in October 2015 will last until the end of this year. However, if overall sales continue to decline despite the stimulus in place, the government could introduce other measures to increase consumption. The government is already under pressure to remove or reduce restrictions on curbing vehicle sales in congested cities in China.
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