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IHS Global Insight Perspective
November's car sales continued to accelerate over October's as the imminent end to incentives spurs consumer demand.
Although the loss of the stimulus is expected to temper growth somewhat in 2011, CAAM remain optimistic or 10% overall rise next year
Beijing's local authority is considering plans for what may be the shape of things to come in China's big cities, where congestion and pollution are spurring them to look at curbing car ownership and usage.
Passenger car sales rose 29.3% year-on-year (y/y) in November to 1.339 million units, as consumer demand continues to be spurred by the imminent end of government stimulus measures (see China: 6 December 2010: Chinese Government Plans to Withdraw Subsidies on Vehicles Under 1.6 Litres from January 2011—Report), continued strong macroeconomic growth and a healthy dose of pent up demand, according to wholesale data compiled by the China Association of Automobile Manufacturers (CAAM). The total also represented an 11.3% rise on October, underlining the rush to purchase before the incentives end. Total industry volume (TIV) including commercial vehicles rose by 26.9% y/y to 1.697 million units in the month and as a market remains the largest in the world after it overtook the United States in 2009. For the year to date (YTD), passenger car sales were 34.9% ahead of last year at 12.449 million units, compared to 10,445 for the U.S. light-vehicle market in the same period. Meanwhile, China's TIV was up 34.1% at 16.395 million units in the YTD period.
Shanghai Auto's big name joint ventures (JVs) grew at above market rate in November, with its JV with GM—Shanghai-GM—topping the individual JV sales chart. Shanghai-GM's passenger car sales rose 35.1% to 106,457 units, overtaking in-house rival Shanghai-VW's total of 99,255 units, itself a 52.3% rise. VW's other JV with First Auto Works (FAW-VW) did not report individual performance figures again in November. GM's other three-way JV with Shanghai and Wuling, which focuses on small light commercial vehicles saw sales slip 4.8% in the month to 85,649 units. Meanwhile, Dongfeng's JV with Nissan performed well as sales rose 25.9% to 110,491, including commercial vehicles. Nissan reported that passenger car sales made up 90,952 units of this total, a 29.8% y/y rise. Nissan continues to outperform its major Japanese rivals in China as Honda reported a rise of just 5.3% y/y to 60,234 units and Toyota fared a little better with sales rising 17% to 83,000 units, according to CAAM. Changan Ford Mazda reported a 28% y/y rise in the month to 38,819 units, while domestic brands Geely saw sales rise 24.5% to 44,155 and Chery reported a 23.4% rise to 67,833 units. BYD continued its poor form as sales slid 18.6% to 41,200 units.
CAAM forecasts that 2011 TIV sales may rise by around 10% to 20 million units, according to vice-secretary Xiong Chuanlin. The association forecasts that TIV is likely to reach 18 million units this year, up 32% from 2009.
Outlook and Implications
Government stimulus remains one of the key drivers in the market, as the statistics bore out. Sales of passenger vehicles with engine size of 1.6 litres or below totalled 939,400 units in November, a rise 11.6% from October and 29.8% y/y, giving them a market share took up 70.1% in the month. Market share of the aforementioned has grown four months in a row now as the fuel-efficiency list has grown to include most models of 1.6 litres or below. For the YTD period, 1.6-litre or below held a market share of 68.5% of total passenger vehicle sales, down 1.2% from the corresponding period last year when the stimulus programme was even more generous.
CAAM's forecast for 2011 of a 10% increase is largely in line with IHS Automotive's current forecast. A number of external factors will influence this as the Chinese government will discontinue its current purchase subsidy programme for cars with engines under 1.6 litres on 1 January 2011. Additionally, the 3,000-yuan (US$451) subsidy on purchases by rural citizens may also expire in January. The subsidy has largely been replaced by a fuel-efficiency subsidy in any case (see China: 30 September 2010: Chinese Government Extends List of Models Eligible for Subsidies) and this is expected to remain in some form or other as a raft of new purchase and circulation taxes based on fuel and carbon dioxide (CO2) emissions are expected to be introduced in the next five-year plan (see China: 25 October 2010: Chinese Government Plans to Increase Taxes on Larger-Engined Models). The Chinese administration reduced the subsidy to 7.5% in 2010 but the vehicle market has still witnessed startling growth this year, even towards the end of the year when the high base comparison was expected to impact growth.However, growth remains easily influenced by the high degree of control in the marketplace. Indeed, initial reports surfaced today indicating Beijing's municipal government's plans to draft regulation to limit the rise in passenger vehicle purchases over the next five years as part of its efforts to ease traffic congestion and improve air quality. The draft plan, part of China's 12th five-year plan, covering 2011-2015, would prevent municipal government agencies in Beijing from buying new cars during the period and said it would seek to limit private vehicle purchases for personal use. The Beijing local government also said it would extend measures to restrict the number of cars allowed on the city's roads each day and step up restrictions on road use during rush hour based on cars' licence-plate numbers, the statement said. The practice was employed effectively during the recent Olympic Games. In addition, parking and tolls are likely to rise. The government is also researching the feasibility of charging congestion fees for certain districts, similar to the Central London Congestion Charging Zone. The government intends to seek public opinion on the draft until Sunday this week.