Automakers, including Toyota, Honda and Nissan, have begun to report strong sales growth in China in February, although year-to-date sales show slower or negative year-on-year rates.
IHS Markit Perspective:
- Significance: The Chinese passenger vehicle market has benefited from more working days in February this year, as in 2016 the Chinese New Year fell in the month, so reducing the number of working days then.
- Implications: A number of international automakers reported low sales in February 2016, giving them a low base of comparison to the same month this year.
- Outlook: IHS Markit's automotive forecasts continue to show a slower sales growth rate in China in 2017 than witnessed last year, following the ending of the significant market stimulus policy that influenced sales in the country in 2016.
Automakers have begun reporting their vehicle sales in China during February, and so far a number of international automakers have reported strong growth in the month.
Toyota has reported total sales of 81,000 units in China in February, marking an increase of 25.1% year on year (y/y), according to an email the automaker has sent directly to IHS Markit. However, on a year-to-date (YTD) basis, the automaker sold 183,600 units in China, a decline of 3.6% y/y.
Toyota has two joint ventures (JV) in China which produce and sell passenger vehicles. The FAW-Toyota JV sold 47,500 units in February, up 19.3% y/y, while on a YTD basis, sales were actually down 1.3% y/y to a total 98,800 units. Meanwhile, the Guangzhou Toyota JV sold 24,400 units in February, marking an increase of 25.1% y/y, while on a YTD basis, sales were down 13.9% y/y.
Nissan has reported sales of 74,830 units in February in China, marking an increase of 23% y/y. On a YTD basis, Nissan sold a total of 194,241 units in China, an increase of 3.10% y/y. Nissan's JV with Dongfeng Motor which produces and sells passenger vehicles in China sold 61,116 units in February, marking an increase of 18.1% y/y. On a YTD basis, the JV sold a total of 168,431 units, up 4% y/y. Meanwhile, Zhengzhou Nissan, another JV with Dongfeng, which produces and sells light commercial vehicles, sold 11,313 units in China in February, up 58.9% y/y.
Honda's sales in China surged 41.4% y/y to 81,125 units in February, according to the Japanese automaker. The Guangzhou Honda JV posted sales that were up 34.4% y/y to 42,000 units, while the Dongfeng Honda JV's sales leapt 49.8% y/y to 39,123 units. On a YTD basis, Honda's sales in China improved 17.9% y/y to a total of 194,169 units, with Guangzhou Honda's sales up 17.8% y/y to 107,177 units and Dongfeng Honda's sales up 18.0% y/y to 86,992.
Outlook and implications
On the whole, February seems to have got 2017 off to a positive start as automakers have begun revealing solid growth in the month. Premium brands such as Cadillac and Acura have also reported solid growth and this is on the back of these brands having increased their locally produced models in China in 2016, and so are now benefiting from these new model line-ups. Acura's sales climbed to 800 units in February, up from just 175 units in the same month a year earlier. The CDX's sales were 716 units in February and totalled 1,295 units in the first two months. The compact sport utility vehicle (SUV) was designed for China. Production of the model in the country started under the Guangzhou JV in 2016 and its output totalled 10,514 units in the first year. Meanwhile, Cadillac sold 9,034 units in China in February, up 89.6% y/y, bringing its YTD sales in the country to 27,045 units, up 106.4% y/y. The model behind this growth for Cadillac was the XT5 SUV, which was introduced to the brand's local production line-up in 2016. Cadillac is expected to bring in more SUV models to its Chinese line-up, specifically targeting local consumer tastes.
However, in order to understand whether the overall market is indeed on a positive trajectory, we need to look back to February 2016. In February last year, the overall market in China dipped 1.5% y/y, with locally produced passenger vehicles' sales dropping to 1.3 million units. Most automakers reported significant drops in sales in China in the month, with Nissan's down 13% y/y and Honda's down 7.7% y/y, while Toyota's sales were up 6.3% y/y. February 2016 was also the month of the Chinese New Year, so the annual week-long holiday fell in the month and reduced the number of working days. This year, however, the Chinese New Year, which is based on the lunar calendar, fell in January. February this year, therefore, had extra working days compared with the same month of 2016 and this is one of the reasons automakers have reported sales growth in the month.
However, the sales trajectory forecast shows that the Chinese market is likely to witness far slower growth than in 2016, when the passenger vehicle market benefited significantly from the 50% cut in the new-car purchase tax for small-engine models, which has been revised to just a 25% tax reduction in 2017.
For full-year 2017, IHS Markit currently forecasts a 1.6% year-on-year (y/y) increase in light-vehicle sales in China. We expect passenger vehicle sales in China, which include SUVs, sedans, and MPVs only, including both locally produced and imported models, to witness sales of 23.53 million units, up 1.9% y/y.
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.