Will Chinese Automotive Market Stop Falling?

China Automobile Dealer Association (CADA) on August 9 published a domestic market report of July production and sales of passenger cars which saw declines in both indicators.

The report says domestic sales of passenger cars in July reached 1.48 million units, which fell by as much as 15.9% and 5% compared with June this year. In comparison with sales in the same period of last year, the number also dropped by 5%. Total sales of passenger cars from January to July in 2019 jumped 8.8% from a year earlier. Production of passenger cars reduced 10.9% year-on-year to 1.5 million units in July. Compared with June production, the number dropped by 3.8%.

Chinese automobile market first saw a decline in sales in 2018, which never occurred over the past 28 years. In the first half of 2019, due to effects of new policies in terms of vehicle pollutant emissions and subsidies to new energy vehicles, vehicle sales temporarily recovered in June and then continued to decrease afterward.

Many Chinese security companies such as Sinolink Securities and GF Securities expect electric vehicle sales to rise in the second half of 2019, based on new dual-point policy and vehicle consumption tendency, whereas HSBC holds opposite views.

The British bank recently adjusted growth rate of Chinese vehicle sales for the whole 2019 from 2.6% up to 5.9% decline as they emphasize on effects of reduced subsidy policy and macroeconomic environment. HSBC believes the Chinese vehicle market will recover to grow as early as 2020.

For electric vehicle market, sales reached 645,000 units in the first seven months this year, growing by 53.7% compared with the same period in 2018. While automobile market remains in a recession, new energy vehicles are still regarded as the future of the industry. Total sales of electric vehicles are estimated to increase by 19.4% in 2019 compared with last year, according to China Association of Automobile Manufacturers.