Recovery in China’s Auto Sector Strengthens

  • 2020-06-13 12:00:00
  • Reporter

China's automobile industry is rebounding from sluggish sales in 2019 and a devastating setback from the coronavirus pandemic and lockdown earlier this year. Rising customer demand and robust incentives have seen the sector grow over the past two months.

According to CAAM (the China Association of Automobile Manufacturers), pent-up demand and supportive government policies drove sales up by 4.4% year-on-year in April 2020, ending 21 consecutive months of falling sales.

In May, output rose to 2.19 million units, up 15.9% from the previous month and up 18.2% compared to May 2019. Auto sales were up 10.1% compared to the previous month and up 14.5% compared to May 2019.

Passenger car sales rose 1.8% year-on-year in May to 1.61 million units. This compared to the sales falling by 20% in January, 78% in February and by 40% in March, according to figures from the China Passenger Car Association (CPCA).

A spokesperson for China’s Ministry of Commerce said the country’s auto market still has great potential for development, as demand is still strong. The recovery is expected to be sustained, since more policies are to be implemented by the government to stimulate demand.

There has been support across agencies of the government to boost the recovery of the China’s auto market. According to a Xinhua report, in April, 11 central departments jointly issued a circular, urging efforts to increase support for personal auto consumption credit. It also urged the further release of auto consumption potential by appropriately lowering the down-payment ratio and loan interest rate as well as extending the repayment period.

At the local level, vehicle purchase restrictions were loosened, with new quotas added in many cities. 12.1% of applicants for license plates of private non-operating vehicles in Shanghai were assigned one in May. This was a record high in six years, compared to the 4 to 7% seen in recent years. The Chinese government plans to increase 20,000 new-energy vehicle (NEV) quotas this year to families without cars.

Other incentives used by local authorities to boost auto consumption include granting subsidies to car buyers, encouraging sales expansion in rural areas and supporting the promotion of used cars.

Following the coronavirus outbreak in China and once the lockdown was gradually lifted, auto demand increase with the rising awareness of the need for private cars-with public transport being avoided. According to a survey carried out by the market information service provider JD Power, almost half of respondents, having had no plans of purchasing cars before the coronavirus outbreak, said they might or were going to buy cars .Now with schools across China resuming classes, there is growing demand for cars from families, says the CPCA. Luxury/prestige car sales rose by 16% year-on-year in April and by 28% year-on-year in May, while low-end passenger cars also gained popularity among certain consumers, with families needing a car as a necessity. First-time buyers especially showed greater interest in cars worth around 100,000 yuan (about $ 14,111).

With a greater focus on electric vehicles, or NEV (New Energy Vehicles), as they are known in China, Beijing is determined to promote the industry. The government has extended subsidies and tax exemptions for NEV purchases, which were due to expire by the end of 2020, by another two years.

In five to eight years, NEV sales in China are expected to keep pace with fuel vehicles in terms of competitiveness.

With the challenges of reaching customers in the midst of a pandemic, China’s auto industry explored new sales modes, such as online car displays with the support of high technology and live streaming shows. In April, an online automobile exhibition with displays of over 60 brands of vehicles, attracted over 91 million visitors in 20 days, with estimated total transactions hitting around 1.99 billion yuan ($280,000).

Reflecting the bullish sentiment of global auto majors towards the world’s largest auto market, German auto giant Volkswagen has announced plans to invest 2.1 billion euro ($2.36 billion) in China to develop its EV business in the country, according to Xinhaua, while it is hoped that the country’s enormous auto market and highly-developed auto industry supply chains will encourage Japanese companies to increase their investment, rather than leave the country.

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