Business Maverick

Business Maverick

China Car Recovery Gathers Pace With July Sales Accelerating

A General Motors Co. Buick dealership stands in Shanghai, China, Thursday, July 18, 2019. The future for GM in China is in the hands of customers considering whether to go electric. No other country comes close to China, in terms of scale and adoption of new-energy vehicles, where more electric cars have been sold in Shanghai alone than in all of the U.S., U.K., or Germany. Photographer: Gilles Sabrie/Bloomberg

A recovery in China car sales accelerated last month, signalling the world’s biggest auto market continues to return to health following a two-year slump and a blip in June.

Chinese retail sales of sedans, SUVs, minivans and multipurpose vehicles expanded 7.9% in July from a year earlier to 1.63 million units, the China Passenger Car Association said Tuesday. The sales trend had been improving over several months before a 6.5% drop in June.
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The car industry is betting that the reopening of showrooms and malls as the coronavirus pandemic eases in China will lead to a sustained increase in demand. The outbreak exacerbated a slump brought about by a slowing economy, trade tensions with the U.S. and stricter environmental standards.

Yet challenges remain: the economy is still recuperating, and new technologies such as electrified motors may be prompting some buyers to put off purchase decisions. China’s gross domestic product expanded 3.2% in the three months to June from a year earlier, following a 6.8% decline in the first quarter.

Car wholesales rose 8.5% from July last year to 1.67 million units, the China Association of Automobile Manufacturers said separately. Xu Haidong, a CAAM assistant secretary general, cautioned in an online briefing that there was an “obvious increase” in inventories last month, suggesting sell-through to consumers hasn’t been as strong as sales from manufacturers to dealerships.

Yet investors have been encouraged by the uptick in sales. Shares of China market leader Volkswagen AG have risen more than 40% from a mid-March low, while challenger General Motors Co. is up more than 60% over that span. Local contender Geely Automobile Holdings Ltd. and peer Brilliance China Automotive Holdings Ltd., a partner of BMW AG, have added more than 50%.

Premium marques such as BMW and Mercedes-Benz have thus far emerged from the slump quicker, helped by demand from wealthier consumers, while cheaper local brands are recovering at a slower pace.

Wholesales of new-energy vehicles, including electric cars, advanced for the first time this year, rising 19% in July from a year earlier to 98,000 units, CAAM said.

Tesla Inc., which started deliveries from its massive new Shanghai factory around the start of 2020, has quickly grabbed market leadership and been a rare example of an electric-car maker boosting monthly registrations this year. Tesla sold 11,014 autos last month in China and kept its top spot in battery-powered cars, PCA said.

Costly Electric Vehicles Confront a Harsh Coronavirus Reality

After growing rapidly for several years, electric-car sales lost momentum as the government moved to limit subsidies in mid-2019. The pandemic also hurt demand, while falling oil prices made gas guzzlers more competitive. China still sees electric cars as a long-term priority, and has added new stimulus measures to help the industry recover.

Sales of NEVs are set to reach 1.1 million units this year in the country, with Tesla accounting for about 100,000 of that, CAAM forecast. That compares with NEV wholesales of 1.21 million units in 2019, according to data from CAAM.

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