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Chinese Vehicle Sales Rise Almost 20% Y/Y in January
21 Feb 08
Despite harsh weather conditions in parts of the country, Chinese vehicle buyers continued to come out in droves during January.
Global Insight Perspective | | Significance | Heavy snowfall in January did not curtail vehicle demand in China during the month, sales rising by almost 20% y/y to 859,400 units, with over 75% of these being passenger cars. | Implications | Although there was a rush to buy vehicles during the first month of 2008, it is likely that sales would have been even higher had the weather conditions been better, and so growth is likely to continue in the months ahead due to pent-up demand. However, the snowfall also affected production at some of the country’s largest producers, which may cause minor bottlenecks, although automakers have said that these should be cleared with additional weekend shifts. | Outlook | The Chinese government believes that the vehicle market in the country will surpass 10 million units this year, a view shared by Global Insight. |
According to data released by the China Association of Automobile Manufacturers (CAAM), the number of vehicles sold in January rose by 19.8% year-on-year (y/y), reports Reuters. The total number of vehicles that hit Chinese roads during the first month of 2008 was 859,400 units, of which 661,900 were passenger cars, a sector that also displayed growth of 19.8% y/y. Top 10 Selling Passenger Car Brands During January 2008 | Manufacturer | Sales (Units) | FAW VW | 65,709 | SAIC-GM-Wuling | 59,239 | Shanghai VW | 45,969 | Shanghai GM | 44,122 | Chery | 34,771 | FAW Toyota | 34,139 | Changan Automobile Group | 32,488 | Beijing Hyundai | 30,063 | Dongfeng Nissan | 28,191 | Changan Ford Mazda | 24,343 | Source: CAAM |
From a company perspective, the number of passenger cars built and sold by Volkswagen's (VW) joint ventures (JV) in the country surpassed that of adversary General Motors (GM) during the month. Claiming top and third spot in the sales chart were First Auto Works (FAW)-VW and Shanghai VW, the JV with Shanghai Automotive Industry Corporation (SAIC), which sold 65,709 units and 45,969 units, respectively. Splitting the pair was SAIC-GM-Wuling Automobile, which sold 59,239 units, while GM's other JV in the country, Shanghai GM, took fourth place with 44,122 units sold. The Chery brand was the best of the rest in fifth position, having registered 34,771 units, hotly pursued by FAW Toyota with 34,139 units. Outlook and Implications Sales growth in January slipped from the high rate that was displayed during the same month of 2007, when vehicle sales increased by well over 30% y/y. This stands to reason, for if the number of vehicles sold were to continue to rise at that percentage rate, the market would be largely unsustainable. However, from a numerical point of view, the increase is still on a par with, if not greater than, that seen in previous years. January’s growth rate would likely have been even higher had it not been for the heavy snowfall that hit parts of the country during the month, including one of the most densely populated metropolitan areas, Shanghai; as a result, pent-up demand could result in higher growth rates in the following months. The torrid weather conditions also saw some automakers in the country temporarily halt production (see China: 30 January 2008: Chinese Vehicle Production Halted by Snow), and this may well cause minor bottlenecks as automakers try to catch up with demand, although firms have said that this should be short-lived as extra weekend shifts will be added. One area that was not affected by the weather was the sport utility vehicle (SUV) segment, which rose by 32.5% y/y. A lot of this is down to the rising wealth of the middle classes in China, with customers seeking to display this new-found affluence through the car they drive, in spite of rising fuel costs and a punitive tax policy for large-engined vehicles. Many of the competitors in this field have performed strongly during the past year, and this looks set to continue well into 2008 with the introduction of the Chevrolet Captiva, Kia Sportage, and Nissan Qashqai and X-Trail. However, SUVs still only make up around 5% of the overall passenger car market, and sedans look set to continue to dominate for some time yet. It remains to be seen whether the government will take any further measures to quell the number of people moving towards larger-sized vehicles. For full-year 2008, the Chinese government is anticipating that vehicle sales will hit over 10 million units, and these results show that the market has certainly got off to a good start. The momentum is likely to continue, particularly as optimism is boosted by the Olympic Games, which will take place in Beijing during August. Global Insight agrees with the National Development and Reform Commission's (NDRC) prediction; indeed we forecast the market to just surpass this mark, with 10.01 million vehicles being sold.
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