China Automobile

China Auto Market Trends Chart GDP Growth
China Auto Market Trends Chart GDP Growth

CEIC Gallery/Sectors/China Premium Database/China Automobile Update - March 31, 2016 Summary China’s automobile sales retreated slightly in February 2016 after a remarkable rebound during the December 2015 quarter. The rebound was resulted from both the high season effect and the announcement of tax reduction on vehicle purchase in late September 2015, after the industry had experienced a difficult time in the first half of 2015. Sales volume was 1.58 million units in February 2016, down 0.9% yoy and 76.2% from the peak of 2.76 million units in December 2015. Nevertheless, both sales growth of SUV and MPV remained in double-digit at 44.5% and 10.4% in February 2016, respectively. In fact, the market share of SUV has doubled from 15% to 30% in the past two years. Chart 1 Sector low season is usually in February and from June to August, affected by factories’ shutdown during Chinese Lunar New Year holiday and care and maintenance during summer. Peak season is usually from September to December and from March to April, as consumers are willing to purchase more before and after long holidays, and companies would boost the sales at the end of a year. We can see how these factors affected sales and production in chart 1.   Sales and production volume dropped to 1.58 million units and 1.61 million units respectively in February 2016. In contrast, inventory started to accumulate and reached 1.05 million units in the month. Chart 1. Automobile Market Trend In China Chart 2 & 3  On 29 September 2015, the State Council of the People's Republic of China has announced to waive half of the vehicle purchase tax for purchase of vehicle with engine displacement less than 1.6 liter during 1 October 2015 to 31 December 2016. This helped to boost the sales and lower the inventory level in the December 2015 quarter, which are clearly shown in Chart 2. However, from Chart 3, it is also noted that the sales to inventory ratio reached the alert level again in February 2016. Chart 2. Growth Comparison Chart 3. Sales to Inventory Ratio Chart 4 Passenger Car (PC) and Commercial Car (CC) accounted for 87% and 13% of the total sales respectively in February 2016.   Sedan is the most popular vehicle type, although its market share decreased from 52% in February 2014 to 44% in February 2016. SUV, on the other hand, becomes more popular in China, with market share doubled from 15% in February 2014 to 30% in February 2016.   Although SUV is the most expensive car type among all passenger cars, it has bigger seating capacity and higher handling capability in bad weather and unfavorable road conditions, which matches most middle-class families' needs. SUV also benefited from the vehicle purchase restrictions in some major cities that have traffic problems, as consumers tend to purchase the most suitable vehicle when there is purchase restriction. Chart 4. Automobile Market Share in China, by Vehicle Type Chart 5 In terms of yoy sales growth, SUV outperformed MPV and had the highest growth among all passenger cars since Dec 2014, which matches with its increasing market share mentioned above. SUV and MPV had a sales growth of 44.5% and 10.4% respectively in February 2016, even though the overall sales growth dropped to -0.9%. Chart 5. Passenger Vehicle Sales Growth in China, yoy Chart 6 In 2015, China sold 331 miilion units of pure electric vehicle (EV) and hybrid electric vehicle (PHEV), which is 4.4 times that of the previous year.   In fact, besides the tax-cut incentive discussed in Chart 2 and the vehicle purchase restriction discussed in Chart 4, the government has also introduced other policies to promote new energy vehicle (NEV) and tackle air pollution from vehicles.   In August 2014, the government has announced a tax waiver scheme for purchasing selected new energy vehicles. The scheme is effective from 1 September 2014 to 31 December 2017. The selection lists are managed and announced by the Ministry of Industry and Information Technology (MIIT) and State Administration of Taxation. The 6th selection list was released in late November 2015.   In September 2013, the government has introduced NEV subsidy program. In April 2015, the government decided to extend the program from 2015 to 2020, but the subsidy amount will gradually be reduced starting from 2017. The program includes offering RMB 25,000 - 55,000 subsidy to each pure electric/ hybrids electric  passenger vehicle buyer, RMB 120,000-500,000 to each electric/ hybrids electric bus buyer, and RMB 200,000, RMB 300,000 and RMB 500,000 to each fuel-cell passenger vehicle buyer , fuel-cell light bus/truck buyer, and fuel-cell medium/large/heavy bus/truck buyer respectively. The government targets to have 5 million retain number of new energy vehicle by 2020.   Besides, there was a three-stage subsidy program which was expired in December 2015. The program offered RMB 3,000 subsidy on each purchase of selected fuel-efficient vehicles (passenger vehicle with engine displacement no more than 1.6 liter and consumes fuel 20% less than the government standard). The first stage was from June 2010 to September 2011, the second stage was from October 2011 to September 2013, while the third stage was from October 2013 to December 2015. Chart 6. Production and Sales Volume of New Energy Vehicle in China Chart 7 Among all passenger cars, SUV was the only car type with negative quarter-on-quarter price growth in the December 2015 quarter. In the quarter, the average price of passenger car was RMB 104,633/unit (0.9%), in which the average price of Sedan, SUV and Mini bus was RMB 135,233/unit (2.8%), RMB 140,267/unit (-0.7%) and RMB 38,467 /unit (0.4%) respectively. Chart 7. Average Price Growth of China Made Passenger Car, qoq Chart 8 The average price growth of commercial car was not bad in the December 2015 quarter, due to the strong price growth of Large Bus.   In the quarter, the overall price of commercial car was RMB 212,133/unit (2.5%), in which the average price of Medium Truck, Heavy Truck, Light Bus and Large Bus was RMB 177,267/unit (-0.2%), RMB 280,000/unit (-0.1%), RMB 119,133/unit (-0.1%) and RMB 376,367/unit (6.1%) respectively. Chart 8. Average Price Growth of China Made Commercial Car, qoq Chart 9 Benefited from the tax cut on vehicle purchases announced in late September 2015, there was a rebound in profit growth during the December 2015 quarter. In fact, this rebound helped many manufacturers returning to profit in 2015. Chart 9. Profit of Automobile Manufacturing in China   Chart 10 In 2015, the total automobile imports and exports in China were USD 77,375 million and USD 80,062 million respectively. Imports dropped 21.5% from USD 98,605 million in 2014, while exports dropped 4.9% from USD 84,224 million in 2014. Import vehicles are usually some luxury vehicles or vehicles of some reputed brands. In addition to China's economic slowdown, China's anti-graft campaign was also a factor for the drop in imports. For export, the key would be government's policies. The currency exchange rate, RMB internationalization, as well as the implementation of China's "Made in China 2025" and "One Belt One Road" strategies are some crucial factors for automobile export. China Premier Li Keqiang announced the strategy of "Made in China 2025" in May 2015, which aims to build China's brand by 2025 through driving innovation, better technology and high quality on China's manufacturing industries in the country. He also suggested "One Belt One Road" in 2013, which aims to develop better economic connectivity between China and the Central Asian, Western Asian counties located on the New Silk Road Economic Belt, as well as the Southeast Asian, Oceania, North African and European countries located in the 21st century Maritime Silk Road.  Chart 10. Automobile Import and Export in China Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog

7th April 2016 China Automobile

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