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July’s “strong” market performance not without caveats

Without a surprise, China’s auto market turned out to be pretty “strong” in July, just as the three industry analysts predicted at our Monthly Automotive Salon (MAS) held on July 13 in Shanghai.

According to data released by China Association of Automobile Manufacturers (CAAM) on August 12, auto sales rose 23 percent to more than 1.85 million units in July, including nearly 1.72 million passenger vehicles, which jumped more than 26 percent.

That helped push auto sales in the first seven months of the year past 14.68 million units, up nearly 10 percent. Passenger vehicle sales moved into double-digit growth territory, rising by more than 11 percent to almost 12.65 million units. With five months to go, the market only needs another 10 million vehicles, or an average of 2 million vehicles a month, to break last year’s record of 24.5 million vehicles sold in a year.

The 20 plus percent growths in automobile and passenger vehicle sales in July were something that the market had not witnessed since 2010, when it was in its last round of major “gushing.”

But it will also be short-lived because the previous July was pretty bad due to the stock market “crash” that negatively affected vehicle sales, which fell more than 7 percent compared with July 2014. So the 20 plus percent growth exhibited in July was really inflated and in reality would not have been that high (probably only half as much at the most) if it weren’t for the low base volume in the previous July. 

Come Q4, the near double-digit cumulative growth rate will likely be offset by weaker growth due to an exceptionally strong Q4 2015, when monthly sales averaged more than 2.5 million units after the introduction of the 1.6L tax break at the end of Q3.

Another interesting caveat is new energy vehicle data. While CAAM reported July NEV production and sales of 38,000 and 36,000 units respectively (almost double last year’s levels), the National Bureau of Statistics (NBS) reported July NEV production of 55,000 units, much higher than what CAAM reported but with a much lower year-on-year growth of 61.8 percent. For the first seven months of the year, CAAM reported NEV sales of 207,000 units, up 122.8 percent, but NBS reported production of 323,000 units, up 94.6 percent, more than 110,000 units higher than the 215,000 units in production CAAM reported and nearly 120,000 more than what were sold. The 323,000 units produced also nearly equal the entire NEV production for all of 2015!

Which data should we trust? No one knows for sure. But there are always underlying reasons and caveats behind what is reported on the surface, which often times do not reflect true market conditions.

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