A recovery in China’s car sales showed some increase last month, indicating that the world’s biggest auto market is recovering from a two-year downturn as the coronavirus led restrictions ease.
It has been noted that more people in China now prefer to buy a car after the coronavirus crisis, than travel in public transport.
Retail sales of sedans, SUVs, minivans, and multipurpose vehicles boosted 7.9% in July from a year ago to 1.63 million units, the China Passenger Car Association (CPCA) said. The sales trend had been enhancing on a monthly basis since March before a 6.5% decline in June. Tesla and BYD led the way in electric-car sales in July.
The car industry is betting that the restarting of showrooms and malls as the coronavirus restrictions eases in China will lead to a sustained boost in demand. The outbreak exacerbated a decline brought about by a slowing economy, trade tensions with the U.S., and stricter environmental standards.
Yet challenges still continue to be in their place. The economy is still recuperating, and new technologies such as electrified motors may be urging some buyers to put off purchase decisions until more models with such functions have released. China’s gross domestic product increased 3.2% in the three months to June from a year earlier, after a 6.8% decline in the first quarter.
Car wholesales increased 8.5% from July last year to 1.67 million units, the China Association of Automobile Manufacturers (CAAM) said separately. That implies a boost in inventories, suggesting that sell-through to costumers hasn’t been as strong as sales from manufacturers to dealerships.
Investors have been encouraged by the increase in sales. Shares of China market leader Volkswagen have increased over 40% from a mid-March low, while challenger General Motors saw an increase of more than 60% over that span. Local automaker Geely Automobile Holdings is up nearly 60% and peer Brilliance China Automotive Holdings, a partner of BMW AG, has experienced about 70% increase.
German and Japanese automakers will benefit the most from enhancing demand as consumer trade up, said Steve Man, an expert at Bloomberg Intelligence in Hong Kong. GM and Ford Motor may get hit by increasing tensions between China and the U.S., he said.
Wholesales of new-energy vehicles, including fully electric cars, plug-in hybrids, and fuel-cell autos, advanced for the first time this year, increasing 19% in July from a year earlier to 98,000 units, CAAM said.
Tesla, which started deliveries from its new Shanghai factory from the start of 2020, has quickly grabbed market leadership in fully electric vehicles and is serving as a rare example of an EV maker increasing monthly registrations this year. The American automaker sold 11,014 autos last month in China and kept its top spot in battery-powered cars.
BYD ranked No. 1 in overall NEV sales in July with about 14,000 units, PCA said. The company, backed by Warren Buffett’s Berkshire Hathaway Inc., was helped by sales of both fully electric cars and also plug-in hybrids, which also use gasoline.
Another local EV maker, NIO Inc., reported that its sales more than quadrupled in July to 3,533 vehicles. The automaker also posted a narrower second-quarter loss and forecast third-quarter revenue topping estimates. Its New York-traded shares have more than tripled in 2020.
Following the rapid growth for several years, electric-car sales lost momentum as the government decided to limit subsidies in mid-2019. The coronavirus crisis also hurt demand, while declining oil prices made gas guzzlers more competitive. China still observes electric cars as a long-term priority and has added new stimulus measures to help the auto industry recover.
Sales of NEVs are set to reach 1.1 million units in 2020 in China, with Tesla accounting for about 100,000, CAAM forecast. That compares with NEV wholesales of 1.21 million units in 2019, according to information from CAAM.
