Demand for passenger vehicles continues to lift the sales momentum in China, with vehicles fitted with 1.6-litre and smaller engines accounting for majority of the market.
IHS Automotive Perspective
- Significance: The Chinese auto market continues to gain from demand in the hinterland regions for SUVs as the segment rose 46% in April alone.
- Implications: Domestic brands continue to strengthen their presence in China, with their market share at almost 60% in the locally produced SUV market.
- Outlook: As Chinese brand products gain credibility in the domestic market, the automakers are gaining vital experience in fine-tuning their models and passenger vehicle exports are now beginning to gain.
Total vehicle sales in China increased 6.3% year on year (y/y) in April to 2.12 million units, according to latest data from the China Association of Automobile Manufacturers (CAAM). Meanwhile, vehicle production rose 4.3% y/y to 2.17 million units, reports the CAAM. On a year to date (YTD) basis, sales were up 6.1% y/y to over 8.65 million units, while production levels hit 8.76 million units, up 5.7% y/y.
However, the growth continues to come from certain segments within the large passenger vehicle (PV) market in China. The PV market, as defined by the CAAM, includes sedans, sport utility vehicles (SUVs), multi-purpose vehicles (MPVs), and crossovers (minibuses, large vans) and has likely gained from continued demand for SUVs. However, sedan sales in general have so far been on a decline in the country as consumers move to demand larger MPVs and SUVs. Already a number of OEMs have reported growth in sales in China in April, although there has been a build-up of dealers' inventories.
The PV market witnessed growth in both production and sales in April, although the volumes were below the numbers produced and sold in the preceding month. The data on a year-on-year (y/y) basis in April point to a solid upward trend on the back of the strong demand for SUVs.
The total PV market witnessed sales of 1.779 million units in April, marking an annual increase of 6.5% y/y, while production of PVs rose 4.5% y/y to 1.834 million units. On a YTD basis, the PV market rose to volume sales of 7.448 million units in April, marking a 6.7% y/y increase. In the YTD, production levels of PVs in China hit 7.537 million units, up 6.6 % y/y.
The sedan segment however has reportedly continued to decline, with sales in April down 6.7% y/y and production down 7.3% y/y. In sharp contrast, the SUV segment witnessed double-digit percentage growth in April, with sales up 46.3% y/y and production up 46.8% y/y. The MPV segment also witnessed growth with sales up 13.3% y/y and production up 8.5% y/y; however, the crossover segment continued to decline, with sales down 30.2% y/y and production down 31.8% y/y.
Commercial vehicle (CV) production and sales have begun to rise on a y/y basis. A total of 343,000 CVs were sold in April, marking a healthy 5.4% y/y increase. Meanwhile, a total of 336,000 CVs were produced in April in China, up 3.1% y/y. This was mainly on the back of improved truck sales, with the truck segment witnessing a 7.5% y/y growth rate in April alone; bus sales dropped 6.9% y/y in the month.
On a YTD basis, the CV segment sold a total of 1.202 million units in April, up 2.7% y/y, while production hit 1.223 million units, up 0.6% y/y. Again, truck sales boosted the CV market, with sales up 4.7% in the first four months, but bus sales were down 8.4% y/y.
Outlook and implications
The trend of domestic brands gaining market share continues to manifest itself as sales of Chinese brand vehicles continue to pull up the overall market. In the first four months of the year, a total of 3.301 million Chinese brand passenger vehicles were sold in China, marking a 10.5% y/y increase and accounting for 44.3% of the total PV market, according to the CAAM. In the sedan segment, Chinese brand sales hit 731,000 units, down 19.6% y/y and accounting for less than 20% of total sedan sales. However, Chinese brand SUVs continued to rise, with total sales of 1.489 million units, up 53.1% and accounting for the majority of the total SUV market. Chinese brand SUVs now account for 57.9% of the SUV market in China. In the MPV segment, Chinese brands account for 778,000 units, or 91.6% of the total MPV market in the country.
The market also continues to benefit from the ongoing cut in the new-car purchase tax for vehicles fitted with 1.6-litre displacement or smaller engines. The measure, which was introduced on 1 October 2015 and continues until the end of this year, cuts the purchase tax from 10% to 5% for small-engine vehicles. In April alone, sales of 1.6-litre and smaller engine vehicles accounted for 71.9% of the PV market. Total volume sales of models fitted with engines of 1.6 litre and smaller hit 1.28 million units, a 12% y/y increase from the same period last year, highlighting the solid impact the cut in purchase tax has had on this segment.
Additionally, as Chinese brands continue to strengthen their presence in the domestic market, their products are likely to gain a competitive edge and will likely result in better export results. Although overall exports continue to decline, there is now a glimmer of hope within the export segment. A total of 54,000 units were exported in April, marking an annual decline of 12.9% y/y. A total of 34,000 PVs were exported, marking an annual increase of 5.2% y/y, while CV exports reached 20,000 units in April, down 32.5% y/y.
In January−April, a total of 190,000 vehicles were exported from China, marking an annual decrease of 22.4% y/y. Of this total, PV exports hit 121,000 units, down 11.7% y/y, while CV exports hit 69,000 units, down 36% y/y.
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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.