The large Chinese automakers continue to lead the country's auto market in terms of volume sales, but many of the country's smaller automakers have reported even higher double-digit growth rates than the large groups in July.
IHS Automotive Perspective
- Significance: Chinese brands continue to witness vehicle sales growth, and local automakers benefit from their in-house brands' growth rates.
- Implications: Chinese brands' sales are expected to see slower growth rates, but the final quarter of this year will see a pull forward effect from the anticipated end of the 50% cut in new-car purchase tax for small-engine vehicles.
- Outlook: The Chinese vehicle market saw strong sales growth in July as in the base month of July 2015 there was a major contraction.
The vehicle market in China increased sharply by 23.21% year on year (y/y) in July, according to new figures from the China Association of Automobile Manufacturers (CAAM) states. The CAAM reports wholesale data of locally produced vehicles and covers the number of vehicles demanded by dealerships across China. In July, wholesale deliveries increased to 1.85 million units in China, the CAAM data show. On a year-to-date (YTD) basis, the market rose 9.84% y/y to 14.68 million units, up from 13.36 million units in the same seven-month period last year.
The top players in the market have all reported double-digit percentage growth in sales in July, with the large state-owned automakers continuing to lead the market. Shanghai Automotive Industry Corp (SAIC) Group, which has joint ventures (JVs) with Volkswagen (VW) and General Motors (GM) on passenger vehicles (PVs), has reported wholesale sales of 418,460 units in July, marking a 25.73% y/y increase. However, sales were down compared with those in June, by 7.63% month on month (m/m). On a YTD basis, the SAIC Group sold 3.4 million units, up 6.97% y/y.
The Dongfeng Motor Group follows in terms of market leadership with total sales of 285,051 units in July, up 27.52% y/y, and YTD sales of 2.21 million units, up 7.17% y/y. Dongfeng has a number of JVs in the PV segment, including ones with Nissan, Honda, and Groupe PSA.
The First Automobile Works (FAW) Group was in third place with total volume sales of 224,920 units in July, an increase of 14.89% y/y. On a YTD basis, the FAW Group sold 1.7 million units, up 9.06% y/y. FAW's JVs include ones with VW and Toyota.
The Changan Group was in fourth place with total monthly sales of 191,683 units, an increase of 18.19% y/y. In the YTD, the group sold a total of 1.67 million units, up 2.89% y/y. Changan has JVs with Ford, Mazda and PSA.
In fifth position in July was the Beijing Automobile Industry Corp (BAIC) Group, which sold a total of 180,484 units, an increase of 24.96% y/y. On a YTD basis, BAIC sold a total of 1.48 million units, marking an increase of 12.21% y/y. BAIC has JVs including ones with Hyundai and Daimler. The Guangzhou Automobile Group Corp (GAC) was in next place with sales of 130,887 units in July, up 35.88% y/y, and YTD sales of 869,706 units, up 30.81% y/y.
Chinese automakers have reportedly witnessed very high growth rates in sales in July. Great Wall Motor witnessed very high growth in the month, with sales rising 45% y/y, while Geely's sales rose 74.3% y/y and BYD's sales were up 46.64 y/y. Commercial vehicle (CV) companies Hunan Jiangnan and China National Heavy Duty Truck Company (CNHTC) have also reported solid growth in July, with sales up 117.45% y/y and 40.09% y/y respectively.
Outlook and implications
Total sales in the PV segment were 1.6 million units in July, marking an increase of 26.48% y/y, although the sales were down by 10.06% m/m. On a YTD basis, PV segment sales were 12.64 million units, up 11.13% y/y. Note that the CAAM includes sedans, sport utility vehicles (SUVs), multi-purpose vehicles (MPVs), and crossovers or minibuses in its definition of passenger vehicles.
Amongst the top five automotive conglomerates, BAIC witnessed the fastest growth with YTD sales rising 12.21% y/y. BAIC has JVs in the PV segment with Daimler and Hyundai. The Beijing Benz Automotive joint venture sold a total of 23,909 units of locally produced Mercedes-Benz cars in July, marking an increase of 4.75% y/y. On a YTD basis, the JV sold a total of 167,307 units, marking a 32.93% y/y increase. Meanwhile, the Beijing Hyundai JV sold 70,016 units in July, up 29.24% y/y, and a total of 592,785 units in the YTD, up by 5.02% y/y.
The CAAM also lists the various internal subsidiary companies of BAIC involved in PV production and sales, and these companies witnessed far higher growth rates than the JVs. Beiqi Foton's PV sales were up 107.33% y/y in July, and up 61.12% y/y to 12,195 units in the YTD. BAIC brand PV sales reached 24,666 units in July, marking an increase of 127.42% y/y, and 186,760 units in the YTD, a rise of 51.68% y/y. BAIC's SUV sales in the YTD rose 89.99% y/y, helped by new models, while the Beiqi Yinxiang subsidiary sold 16,202 units in July, down 5.28% y/y, while YTD sales at the Chongqing base rose 21.24% y/y to 169,725 units.
The main trend is that the sales of local brand vehicles are still witnessing high growth rates on a YTD basis. This is further exemplified by the smaller automakers such as Great Wall Motor, which has reported sharp growth in July, as have Geely and Chery. However, the rise of the Chinese brands is expected to witness a slowdown as international automakers ramp up their offerings of small-engine, more cheaply priced models to compete.
Companies such as the Changan Group have begun to feel the pinch when JV sales do not rise as quickly as anticipated. The company's JV with Ford, Changan Ford, only witnessed sales growth of 1.68% y/y to 489,701 units in the YTD, although the JV's sales growth was 27.46% y/y in July. Meanwhile, sales of the Changan Suzuki JV increased 13.81% y/y in July, but YTD sales were down 11.78% y/y. The relatively new Changan PSA JV witnessed dismal sales in July, down 62.54% y/y, while in the YTD sales were down 39.57% y/y. The Changan Mazda JV sold 13,050 units in July, up 2.28% y/y, with total of sales of 104,212 units in the YTD, up 13.67% − one JV showing growth for the automaker. However, the Changan brand's PV sales hit 67,590 units in July, up 9.65% y/y, although they were marginally down by 0.13% y/y to 685,355 units on a YTD basis, as the automaker launched a number of well-received models in preceding years.
Overall, the solid sales in China in July this year are on the back of a dismal July 2015, when the market contracted 7.1 y/y, sending shock waves through the industry. This decline pre-empted the government to introduce the 50% cut in the new car purchase tax for locally produced small-engine vehicles, which was brought in from 1 October 2015 and is still in force, helping to boost sales in China.
In July, around 71.3% of the Chinese PV market's sales were of vehicles fitted with engines of 1.6 litres or smaller. The cut in new car purchase tax was introduced in 2015 after a disastrous summer when the government worried that new-car sales would continue to drop and it was forced to introduce a quick-fix remedy for the market. This stimulus measure, which had also been used previously, continues to benefit the PV market in China and is expected to be in place until end of the year. In addition, the double-digit percentage y/y increase in PV sales in July is also the result of being in comparison to a month last year when PV sales actually declined. In July 2015, the market in China suffered a decline in PV segment sales of 6.6% y/y.
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