Spurred by an 8.9 percent growth of the national economy, tax cuts, and other government stimulus measures, China’s passenger vehicle segment scored exceptionally robust gains in 2009. Passenger vehicle sales (including passenger cars, SUVs, MPVs and microvans) skyrocketed by 52.93 percent year-on-year to 10.33 million units in 2009, according to statistics released by China Association of Automobile Manufacturers (CAAM). PV sales in December alone jumped 88.7 percent year on year to 1.1 million units.
Sales of passenger vehicles by segment in 2009
2009 2008 % Change
PC 7,473,100 5,046,900 48.07%
MPV 248,900 197,400 26.10%
SUV 658,800 447,700 47.15%
Microvan 1,950,400 1,063,600 83.38%
Total 10,331,200 6,755,600 52.93%
The government’s stimulus policies, including the “automobiles to the countryside” program (vehicle subsidy program for rural areas) and purchase tax cuts for vehicles of 1.6L engines and below were responsible for a strong boost to PV sales in 2009. The Chinese automotive market featured strong and fast expansion in Tier 2 and 3 markets and western areas, which contributed to over 50 percent of its overall growth. In the PV segment, microvan and PC sales witnessed explosive growth spurred by increasing demands in these markets.
Rao Da, director of CADA’s marketing branch, believes that the car shopping spree of those born in the 1980s is adding another strong push to the booming market this year. With financial support from their parents, people in this demographic group are buying cars shortly after graduating from college. Furthermore, their supervisors or managers, many of whom are still considerably young (born in the 1960s or 1970s), are feeling impelled to buy cars as well. It seems as if passenger vehicles are becoming daily necessities for middle- and upper-middle-class Chinese families.
According to CAAM, 221 new models (including revamped and all-new ones) were launched in China last year, 114 more than in 2008. 175 of the 221 models were PC products, 75 more than in 2008. And 120 of the 221 new models are from Chinese independent automakers.
Shanghai-Volkswagen edged Shanghai-GM by a small margin in terms of passenger vehicle sales (microvan not included).
Most of the major automakers in China saw their year-on-year growth rates exceeding 20 percent at yearend, except for FAW-Toyota (14 percent), which was nevertheless making improvements gradually. BYD, Beijing-Hyundai, Shanghai-GM and Dongfeng-Yueda-Kia experienced the most aggressive growth during this period.
Continuous robust sales in 2009 drove inventory to historic lows, which brought in significantly improved economic returns to automakers.
Market shares of domestic automakers increased sharply at yearend
Chinese homegrown brands had been holding a combined share of 27-30 percent of the domestic PV market (microvans not included) over the past few years, and that number finally surpassed 30 percent in 2009.
Competition in this segment heated up over the past year. While Volkswagen continued to strengthen its leading position, other multinational automotive groups experienced violent fluctuations on the ranking list. Hyundai, GM and PSA all saw increased shares in 2009. Yet industry experts believe the three groups have just bottomed out, and the positive growths might not continue for long.
Traditional strong players such as Volkswagen, Toyota and Nissan fared poorly in enlarging market shares last year because they had been running short of production capacity towards year’s end.
Chinese independent automakers benefited the most from explosive growths in December as they had higher market demand, a more abundant capacity, and greater inventory than their JV counterparts.
PV market shares of JV automakers experienced a smooth decline from 2003 to 2007, while that of Chinese private automakers saw gradual growths in the meantime. In 2008, JV automakers snatched 2 percent share from State-owned PV manufacturers, but experienced a sharp drop of 4 percent in 2009 . Shares of privately owned automakers experienced slight growths in 2008 and finally climbed to 13 percent in 2009.
Shares of State-owned automakers began falling after reaching the peak of 22 percent in 2005. Their shares plunged to a historic low of 17 percent in 2009. They will need radical reforms to turn the tide, industry analysts suggest.
Private automakers have been seeing steady growths over the years. After they picked up growths in 2006, shares of private automakers have been climbing at an average rate of 1 percent a year to 13 percent in 2009. The gap between State-owned and private automakers has been narrowing over the years.
Shares of JV automakers declined gradually from 2002 to 2009. However, they still maintain strong competitiveness against domestic players in a car market with upgraded consumer needs and tightened laws and regulations.
Passenger car sales grew most in Tier 2 and 3 markets
Boosted by sales tax cuts for small cars and burgeoning demand in Tier 2 and 3 markets, passenger car sales rocketed by 48.07 percent to 7.47 million units in 2009. Sales in Tier 2 and 3 cities grew by 41 and 51 percent respectively in the first three quarters of 2009, contributing 40 and 34 percent of total PV sales. In the meantime, sales in Tier 1 markets only grew by 34 percent and contributed 26 percent to PV sales growth.
CAAM statistics show that sales of the top 10 passenger car models totaled 2.03 million units in 2009, accounting for 27 percent of total PC sales. Of the 10 models, nine saw year-on-year growths at varying degrees except for the Toyota Corolla which experienced a slight decline. The BYD F3 and Hyundai Elantra Yuedong saw the most aggressive growth in 2009.
The BYD F3 topped the PC segment by totaling 291,000 units in 2009, ahead of the second place finisher by a margin of 50,000 units. The F3 is the first homegrown brand car exceeding the benchmark of 20,000 units in monthly sales. High cost-performance ratio and the Corolla-like appearance of the F3 appeal to many first-time buyers, which account for 80 percent of total automobile customers in the country.
The Excelle and Elantra Yuedong finished in second and third places by selling 241,000 and 239,000 units respectively in 2009. Sales of the Elantra Yuedong soared 178 percent year-on-year, and its monthly sales stood at close to 20,000 units last year. Bogged down with sluggish sales of its 1.8L variants, the Corolla was the only one of the top 10 models that saw negative growth during the past year.
Encouraged by the consumption tax cut policy issued last March, potential buyers for 1.8L and 2.0L cars, such as the Corolla and Sylphy, turned to 1.6L models instead. Shares of 1.6L-2.0L cars shrank by 5.99 percent in 2009. Market demand for 1.6L and higher cars started to pick up from the second quarter of 2009 as a result of the improved economy and upgraded needs of second-time buyers.
However, 1.0L-1.6L cars still stood out as the largest winner, expanding share its share of the PC segment by 7.03 percent last year. Inspired by robust sales, automakers and dealers cut back on discounts and other promotion efforts. Retail prices of those popular 1.6L models such as the Tiida, Lavida and Octavia were higher in the second half of 2009 than in 2008. Most of those popular cars were out of stock towards yearend.
Shares of 1.0L and smaller cars grew by only 0.77 percent last year, because few new products in this segment were released and tax cuts for them were less appealing than for those 1.6L models.
MPV segment experienced mild growths in 2009
MPV sales for 2009 totaled 253,833 units, a jump of 27.5 percent year-on-year, according to CBU-Autostats.
As the end of the year is a traditional car shopping season for government agencies, enterprises and private businesses, MPV sales peaked in December, a year-on-year growth of 93 percent, and 14 percent higher than that of November. Over 6,000 Buick GL8s were sold in December alone. After a brand change and price reduction, the Xenia climbed to the first place among independent MPV products in December.
But these buyers comprise an overwhelming majority of MPV consumers in China, with private buyers accounting for a small portion. So when the government and business oriented market reached saturation, MPV sales started to slow down. Sales stumbled by 14 percent in 2008 when the Chinese government cut back on its vehicle procurement budget for disaster relief funds.
However, a number of domestic automakers have unveiled a wide lineup of inexpensive and reliable MPV products in recent years targeting private buyers. Sales to private buyers thus took off in 2008, and those independently branded MPV products managed to grab an over 50 percent share of this segment.
Industry experts estimate that 2010 will see higher growths in the MPV segment.
SUV sales grew by over 50 percent
SUV sales totaled 668,323 units in 2009, up 50.18 percent year-on-year, according to CBU-Autostats.
SUV sales soared through the roof in the last month of 2009. Independent automakers stole the thunder from their JV counterparts with larger growths in this segment. Combined sales of the Zotye 2008 and Zotye 5008 totaled 64,557 units, an increase of 20.69 percent year-on-year.
Industry analysts believe that unlike PCs and microvans, SUV sales are mainly boosted by rigid demand instead of government incentives.
The Honda CR-V remained on the sales throne in 2009, with whole year sales reaching 105,165 units, up 30.47 percent year-on-year. Two new popular models – Highlander and RAV4 – hit the Chinese market in 2009, which also helped drive up sales in this segment.
Microvan segment saw most aggressive growth
Supported by the “automobiles to the countryside” policy, microvan sales reaped the fastest and most aggressive growths in PV segment last year. Sales for the entire year soared to 1.95 million units, a surge of 83.39 percent from the previous year.
According to a source from SAIC-GM-Wuling, about 80 percent of their customers are from rural areas. Microvans are popular among rural buyers as they serve both passenger and cargo purposes. About 700 million Chinese reside in these areas. With the growing economy, spending power in this vast rural market has increased significantly. Such growth has been a big contributor to the overall economy of China, and certainly to the auto industry.
Microvan sales began to cool off last December. But industry analysts believe sales in this segment will stay strong and experience steady growth in 2010.
China’s total auto output and sales this year are expected to grow about 10 percent to 15 million units, said an industry official.
In 2010, the Chinese government will continue to support the auto industry, which is seen as a pillar of the national economy, said Dong Yang, executive vice president and secretary-general of CAAM.
The Automotive Industry Readjustment and Revitalization Plan issued last March listed eight goals, and one of them was to boost shares of independent-branded vehicles to more than 40 percent in the PV segment, and more than 30 percent in the PC segment over the next three years (starting from 2010). That goal seems highly unlikely given the fact that Chinese homegrown brands only managed to grab a 30 percent share of the domestic PV market in 2009, despite being backed by strong government support to small-displacement vehicles.
Industry analysts believe that it will be quite difficult for independent automakers to hold on to this 30 percent unless they continue to make great advances in technology, product quality, branding and marketing.