It looks like 30 million units and 5 percent growth are going down the drains.
Based on the latest data released by China Association of Automobile Manufacturers (CAAM) on December 11, China’s auto sales over the first 11 months of 2017 reached 25.85 million units, up 3.6 percent year-on-year. Despite a new monthly production record of 3.08 million units in November, sales were flat, increasing by less than a percent from a year ago to just fewer than 2.96 million units.
With just a couple of weeks left in the year, the current trajectory will see China sell just fewer than 29 million vehicles in 2017 with a growth of less than 4 percent, which is also the expectation from CAAM, who had predicted at the beginning of the year that the market would grow 5 percent.
In percentage terms, growth is likely to end up more than 10 percentage points below 2016’s level of 13.7 percent, and the market will fail to add an additional one million vehicles for the first time in recent memory. The passenger vehicle market will end up being relatively flat with growth in the SUV market tapering off to below 15 percent, a level that would be considered low relatively to the 40-50 percent growths in years past.
Nevertheless, CBU/CAR believes the following highlights stood out in an otherwise “fast and furious” year despite the normalization of market growth:
Commercial vehicles and heavy-duty trucks in particular, ended up driving the market thanks to a key policy boost that came in September 2016. Who would have thought that heavy-duty truck sales would top one million units again and beat the previous record high in 2010?
A slew of new joint ventures such as JAC-Volkswagen, Renault-Nissan-Dongfeng and Zotye-Ford were formed as foreign automakers race to meet the upcoming “dual credit” requirements.
Smart EV startups, headed by NIO and WM Motor, are rapidly going from “PPT carmaking” to actual car making and more will take the same path in 2018 and 2019.
Geely and Great Wall are starting to form the head of the pack for Chinese brands, as both companies will join the one-million-unit sales club. They are leading a wave of upcoming and strong Chinese brands that are already encroaching previous territory enjoyed by the multinational mass brands. It was a banner year for the luxury segment as quite a few second-tier brands have joined the 100,000-unit sales club. This has created a phenomenon described by the industry as a “dumbbell” effect, which means the multinational mass brands such as Hyundai, Kia, Chevrolet, Citroën and Peugeot are feeling the pressure from Chinese and luxury brands that are at the two extreme ends of the market.
The industry can now start to ponder how the market playout will be in 2018. A recent live survey conducted at an industry forum indicated that nearly two-thirds of the respondents see growth in 2018 to be between 0-5 percent.
CBU/CAR is a bit more pessimistic and believes growth will be flat, if not negative.