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Believe in a better 2020?

Just as I predicted in my Happy New Year editorial in our last issue, China’s auto and new energy vehicle sales both fell in 2019, according to December and full-year data released by China Association of Automobile Manufacturers (CAAM) on January 13 (see Double whammy: China auto and NEV sales both fall in 2019).

Auto sales fell for the second year in a row and NEV sales fell for the first time ever since production and sales data became available in 2011 following the country’s “10 cities, 1,000 vehicles” initiative announced in early 2009, which set off nearly a decade of gushing growth for NEVs.

That came to a screeching halt in 2019, due in part to a more than 50 percent reduction in subsidies implemented mid-year.

The fact that auto sales fell again in 2019 should not come as a surprise as that was pretty much expected in the industry circles at the beginning of the year. A fall in NEV sales, however, was not expected. No one saw the drop in subsidies to have had such a huge effect on sales.

With 2019 well behind us, the focus turns to what is going to happen in 2020.

Has the current slide bottomed out?

Not quite, but close, according to CAAM and several industry analysts. CAAM has already forecasted a 2 percent drop again in auto sales this year to roughly 25.3 million units.

Miao Wei, minister of Industry and Information Technology, told the audience at the China EV 100 Forum 2020 (highlights will be featured in our next issue) last week that he expected the market to bottom out at 25 million units and return to growth. Cui Dongshu, secretary general of China Passenger Car Association (CPCA) and a veteran industry analyst, thinks the same.

China Automotive Review agrees with CAAM that auto sales will fall slightly again this year but will maintain a level of above 25 million units. We also believe NEV sales will return to growth as the country maintains a stable NEV policy (no significant cuts in subsidies, according to Miao) in the final year of NEV subsidy availability, introduces additional non-monetary measures to maintain momentum, and as more NEV models from traditional foreign and Chinese automakers as well as the Chinese smart EV startups hit the market and charging infrastructure further improves.

Dr. Stephan Wöllenstein, CEO of Volkswagen Group China, said at the same China EV 100 Forum 2020 that this year will be a decisive year to regain momentum in the NEV market and that will require joint efforts from all industry stakeholders. The three key factors to bringing healthy growth back to the Chinese NEV market, he said, are highly attractive NEV models, more non-monetary incentives and a comprehensive, attractive charging infrastructure.

China has already set a target to increase the share of NEVs in vehicle sales to 25 percent by 2025. The 1.2 million NEVs sold in 2019 accounted for just under five percent of vehicle sales, so there is a lot of work to do to raise that by five-fold over the next five years.

So, don’t be surprised if measures are implemented to drive sales, also considering that Tesla will also fill some of the void: some have predicted it will sell 100,000 locally-produced Model 3s alone this year.

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