Chinese Vehicle Sales Rise 14% Y/Y During April

The China Association of Automobile Manufacturers (CAAM) has announced that vehicle sales growth in April was slower than in March, reports Dow Jones Newswires. The total number of vehicles sold during the month hit 922,600 units, an increase of 14.1% year-on-year (y/y). Of these, 604,900 units were passenger cars, an increase of 10.8% y/y, but the overall figure was helped along by a gain of 20.9% y/y in commercial vehicle sales to 317,700 units. The overall April sales figure lifts year-to-date (YTD) sales to around 3.5 million units, an increase of 19.4% y/y, with growth of 17.8% y/y to 2.46 million units in the passenger car segment and a gain of 23.1% y/y in the commercial vehicle category to around 1.05 million units.

In the contest to become the top-selling passenger car manufacturer in the country, General Motors (GM) forced its way past Volkswagen (VW) in April with its Shanghai Automotive Industry Corporation (SAIC)-GM-Wuling minivehicle joint venture (JV), having sold 53,387 units in the month. Volkswagen (VW) took the following two places with its JVs with First Auto Works (FAW) and SAIC, selling 47,985 and 47,666 vehicles, respectively. GM's second JV with SAIC, Shanghai GM, sold 39,371 units, while completing the top five was Toyota's JV with FAW, which sold 34,426 units.

Outlook and Implications

During the first two months of 2008, heavy snowfall hit parts of the country, resulting in vehicle production stoppages (see China: 30 January 2008: Chinese Vehicle Production Halted by Snow). There was also a slight decline in sales growth over the course of this period, with the expansion rate falling below 20% y/y, as the poor weather conditions dissuaded customers from entering showrooms, as well as causing supply bottlenecks. March saw a gain of over 23% y/y in vehicle sales, with passenger car sales expanding by over 25%, which may have been thanks to the release of pent-up demand following the poor weather at the start of the year.

By comparison, sales growth in April appears to have fallen sharply. However, the Beijing Motor Show took place towards the end of the month, and potential customers may have been waiting to see automakers’ planned launches before making any purchase decisions. Among the new vehicles that are likely to have an impact are the latest revamp of the Buick Excelle, which will be launched in May by Shanghai GM, while FAW VW and Shanghai VW will enter the market with similar locally developed vehicles under the Bora and Lavida tags. All the JVs are expecting these models to give the respective brands an additional sales boost before the end of the year. Furthermore, the deceleration in growth during April may have been down to the shorter holiday period in May, with vehicle purchases for travelling purposes less significant. However, conversely, this reduction in the holiday period from seven days to three may result in strong gains in May as there will be more working days compared to the same month last year.

One area of the market that continues to enjoy strong growth in China is the sport utility vehicle (SUV) segment, and in April this category recorded sales growth of 38.1% y/y to 39,500 units, compared to overall passenger car sales growth of 10.8%. This can largely be explained by 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 performed strongly during 2007, and this looks set to continue well into the current year with the introduction of the Chevrolet Captiva, Kia Sportage, and Nissan X-Trail and Xiaoke, the Chinese nameplate given to the Qashqai. The latter looks set to take the market by storm, although ultimately its sales will be constricted by problems in securing sufficient components for construction of the model (see China: 10 March 2008: Dongfeng Nissan Faces Constraints on Local Qashqai Production). However, SUVs still only make up less than 10% of the overall passenger car market, with sedans continuing to dominate in the main. Moreover, with environmental awareness increasing in China it remains to be seen whether this level of demand will be sustained, especially given the government’s backing for what it calls "new energy" vehicles, having approved seven projects for the technology over the past month (see China: 7 May 2008: Chinese Government Approves Seven "New Energy" Vehicle Projects)