Overall vehicle sales in China have risen by 14% in 2013, with the majority of sales from the passenger vehicle segment.
IHS Automotive perspective | |
Significance | Vehicle sales have risen in China with over 81% of sales stemming from demand for passenger vehicles in China. |
Implications | Demand for passenger vehicles will continue to rise but will be driven by demand from interior cities in China which are not yet under scrutiny to reduce vehicle emissions. |
Outlook | IHS Automotive forecasts that light vehicle sales will rise to 22.65 million in 2014 with sales of sedans, sport utility vehicles and multipurpose vehicles, rising to 17.29 million this year. |
Summary data from the China Association of Automobile Manufacturers (CAAM) show that sales in China of locally-produced vehicles hit 21,984,100 units in 2013, an increase of 13.9% year on year (y/y). Meanwhile, a total of 22,116,800 units were produced in China, an increase of 14.8% y/y, the CAAM states.
Sales of passenger vehicles hit 17,928,900 units, an increase of 15.7% y/y; a total of 18,085,200 passenger vehicles were produced locally, an annual increase of 16.5% y/y. CAAM defines passenger vehicles as sedans, sport utility vehicles (SUV), multipurpose vehicles (MPV), and minibuses.
Sales of commercial vehicles hit 4,055,200 units up 6.4% y/y; production of commercial vehicles in China rose 7.6% y/y to 4,031,600 units.
Exports, however, have declined in 2013. A total of 977,300 vehicles were exported in 2013, down 7.5% y/y. Passenger cars made up 596,300 units of the exports, a decline of 9.8% y/y. A total of 381,000 commercial vehicles were exported, down 3.5% y/y.
Vehicle imports in the first 11 months of the year hit 1,073,400 units, an increase of 1.8% y/y. In the same 11 month period, 872,400 vehicles were exported from China, down 6.4% y/y.
Outlook and implications
Demand for personal mobility continues to keep vehicle sales in China growing, with a strong surge in the last quarter of 2013 due to consumers bringing forward purchase plans to buy passenger vehicles in advance of new restrictions imposed in major cities in 2014 to curb total new vehicle sales in a bid to counter the rising issue of vehicular pollution. December sales were good for a number of automakers, mainly those with strong international brand penetration in China, as consumers brought forward their purchases ahead of the new year.
In 2014, sales of light vehicles in China, which IHS defines as passenger vehicles and light commercial vehicles (LCV), are forecast to grow to 22.65 million units in 2014. IHS Automotive definition of passenger vehicles does not include minibuses.
IHS Automotive forecasts show that passenger vehicle sales will grow by 10.44% y/y to 17.29 million units in mainland China alone during 2014.
In the LCV segment in 2014, LCV sales are forecast to rise 4.74% y/y to 5.35 million units.
The Chinese central government has issued several mandates to reduce pollution across China. These include restrictions on new vehicle sales in the country, with major tier 1 cities now announcing restrictions on new car sales (see China: 25 September 2013: New Chinese regulations to aid new car sales but future restrictions will curb growth). The effect, as predicted, will see a sudden surge in sales of new vehicles prior to the restrictions coming in. However, once the restrictions are in place new car sales will slow down.
Tianjin is the latest major city to announce restrictions to be implemented in 2014, resulting in a surge in sales now, in the months prior to the restrictions being enforced. This has led to the new vehicle sales to be brought forward, which will therefore reduce the overall growth in new car sales in the city for 2014.
In 2014, Tianjin will limit the number of new vehicle sales to around 110,000 units, local media claims – although officially the city has not announced the volume restriction for the year. The city is the latest to implement restrictions, following Beijing, Shanghai, Guiyang, and Guangzhou. Other cities are expected to soon follow suit with restrictions for 2014 and beyond.
The official quota for new vehicle sales in Beijing is limited to 150,000 units in 2014; the quota for Shanghai is anticipated to be between 200,000 and 300,000 units; for Guangzhou it is 120,000 units; and the restriction for Guiyang is 25,200 units.
Meanwhile, the surge in vehicle exports in 2012 has dropped, with exports in 2013 down by 7.5% y/y. This has been the result of a number of issues, such as the introduction of tariff measures in countries such as Brazil to offset the surge in imports of Chinese made vehicles. The drop in exports has also been the result of an over-ambitious export plan by Chinese automakers. In the preceding years, Chinese automakers aimed to sell their vehicles in a multitude of markets across the planet. The result has been a costly exercise, as exporting a low number of vehicles is expensive. This has resulted in Chinese automakers now toning down the number of countries they are targeting, while focusing more on established markets where they aim for volume sales in the future. These include markets such as Brazil and developed markets such as countries in Europe and North America.
December saw a surge in vehicle sales locally, with 2,134,200 units sold. Overall, every month in 2013, aside from February, which was when Chinese New Year holidays were, saw an annual y/y increase in vehicle sales, with passenger vehicle sales strong and seeing a sudden surge in September. This was also due to the low base level of sales seen in the last quarter of 2012, due to the drop in sales for Japanese brand vehicles in China, following on from the political dispute between the Chinese and Japanese governments regarding the ownership of the Diaoyu/Senkaku Islands.
Although this situation has not as yet been resolved, Japanese automakers have spent 2013 strengthening their product lineups and highlighting their commitment to Chinese buyer. Japanese automakers aim to entice Chinese buyers with quality vehicles and further enhance their image in China. Japanese brands have announced plans to begin local production of their premium and luxury brands in China – Nissan will start production of its Infiniti brand in China, Honda its Acura brand, and Toyota will also bring in its Lexus line of vehicles to be locally produced.
The rise in restrictions curbing new vehicle sales in major cities of China will see automakers strengthening their brand penetration to the smaller tier cities across China. Although we continue to forecast a rise in passenger vehicle sales in China, the rise will see a lower growth rate following more restrictions on new vehicle sales spreading to other cities across China as the central government aims to clean China's air.