Vehicle sales in China increased 9% in May and continue to grow on the back of demand for passenger vehicles.
IHS Automotive Perspective
Data from the CAAM show that the sedan segment in China is showing signs of growth, spurred by the tax cut for small-engine models and an increase in the variety of models on offer mainly from market leading international auto brands.
The growth in demand for passenger cars in China in May continues to indicate that, for this segment, growth is expected to remain in positive territory mainly from continued demand for SUVs.
Chinese brands will begin to witness slight deceleration in the rapid advancement in the domestic market as international players bring out more new and refreshed models to counter their local rivals' growth.
Vehicle demand in China continues to increase mainly on growth in demand in the passenger vehicle (PV) market, while in May sales and production of commercial vehicles (CVs) also grew year on year (y/y). China's total vehicle market witnessed 2,064,900 new vehicles produced in May, marking an increase of 5.01% y/y, while sales of new vehicles hit 2,091,700 units, up 9.75% y/y, summary data from the China Association of Automobile Manufacturers (CAAM) show. CAAM data refers only to vehicles produced in China.
China's PV segment continues to maintain the strongest growth in the market with total production of 1,772,100 units in May, up 5.53% y/y, although down 3.68% from the volume produced in April. Sales of PVs in China rose 11.27% y/y in May to 1,793,000 units, and were also up 0.52% month on month (m/m).
The CV segment witnessed production volume of 292,800 units in China in May, up 1.98% y/y, while sales hit 298,600 units, up 1.4% y/y. However, both production and sales of CVs in China were down when compared with April, falling 12.73% and 13.01% m/m respectively.
On a year to date (YTD) basis in May, production of vehicles in China was 10,843,500 units, up 5.75% y/y. Sales of vehicles in the first five months reached 10,755,200 units, up 6.96% y/y. PV production volume in China hit 9,327,200 units in January−May, up 6.59% y/y, while sales were 9,258,200 units, up 7.75% y/y. Production of CVs hit 1,516,300 units in January−May, up 0.89% y/y, while sales reached 1,497,000 units, up 2.23% y/y.
Outlook and implications
The Chinese vehicle market continues to show positive signs with the PV market significantly up in May and sales hitting double-digit growth rates. However, within the market segments change is occurring. Sedan sales witnessed growth in May and this is a solid reflection of shifts occurring in the market. In April, sales in the sedan segment continued to fall, but certain players in the segment did witness growth in sales attributed to refreshed and new models and the ongoing tax cut for cars with engines of 1.6 litres and smaller. In May, the total PV market witnessed sales of 1.79 million units, up 0.52% m/m and 11.27% y/y. Of these, the sedan segment witnessed sales of 921,400 units in May, up 1.77% compared with April and up 1.47% y/y.
The sport utility vehicle (SUV) segment witnessed sales of 627,200 units in China in May, up 2.17% m/m and 36.25% y/y, and the multi-purpose vehicle (MPV) segment witnessed sales of 180,100 units in May, up 0.33% m/m and 28.2% y/y. Meanwhile, in the 'crossover' segment, which includes minibuses and larger vans, sales were 62,300 units, down 24.3% m/m and down 37.26% y/y. This 'crossover' segment continues to pull down the growth of the PV market. Please note the CAAM defines this segment as part of the PV segment.
On a YTD basis, the PV segment witnessed sales of 9.26 million units in the first five months of the year, marking an increase of 7.75% y/y, according to the CAAM data. Of these, the sedan segment witnessed sales of 4.64 million units, marking a decline of 6.11% y/y. The SUV segment sold a total of 3.21 million units, up 44.96% y/y, while the MPV segment sold 1.03 million units, up 15.64% y/y. However, the 'crossover' segment continued to see a decline in volume sales to 367,500 units in January−May, down 31.58% y/y.
Despite the overall growth of the PV segment, the clash between automakers for market share has resulted in a slowdown in the rate of increase for the Chinese brands. A total of 717,000 units of Chinese brand PVs were sold in May, up 12.9% y/y and now accounting for 40% of the PV segment as defined by the CAAM. In the sedan segment, Chinese brands sold 160,000 units in May, accounting for 17.4% of the segment and down 8.2% y/y. A total of 335,000 units of Chinese brand SUVs were sold in May, up 40.2% y/y and accounting for 53% of the segment sales. Chinese brand MPV sales hit 158,000 units in May, up 31.9% and accounting for 87.5% of the segment's sales.
On a YTD basis, the volume of Chinese brand PV sales hit 4.02 million units in May, up 10.9% y/y and accounting for 43.4% of the PV market. Of these, Chinese brand sedan sales hit 891,000 units, down 17.7% y/y and accounting for 19.2% of the segment sales. Chinese brand SUV sales hit 1.82 million units, up 50.5% y/y and accounting for 56.7% of segment sales, while Chinese brand MPV sales hit 936,000 units, up 18.3% y/y and accounting for 90.9% of the segment. When compared with the preceding month's data, the share of Chinese brands slightly declined in most segments in May.
Meanwhile, China's vehicle exports continued to drop year on year, falling 20.9% y/y to 56,000 units in May, but up 4.5% compared with April's exports. PV exports hit 36,000 units, marking an annual increase of 5.2% y/y, while exports of CVs were 20,000 units, down 39.2% y/y.
What is once again apparent in May and indicative of the beginning of a trend is that PV exports grew. This the second month of growth of PV exports, as in April PV exports from China rose 5.2% y/y to 34,000 units. However, on a YTD basis, total vehicle exports were 246,000 units in May, down 22.2% y/y. Of these, PV exports hit 157,000 units, down 10.3% y/y, while CV exports were 89,000 units, down 36.9% y/y.
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