Chinese sales of CVs and EVs drop as passenger vehicles sustain growth

The market in August has shown a drop in commercial vehicle (CV) sales, as well as a drop in sales of new energy vehicles (NEVS) which include pure electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) while overall passenger vehicle sales have continued to grow, albeit at a slower pace. The China Automotive Technology and Research Center (CATARC) has indicated these and other trends in a report based on data from the China Automobile Dealers Association (CADA); data from the China Association of Automobile Manufacturers (CAAM) confirms the figures.

Although overall sales and production of the full vehicle market have performed better in August than in July, the year-on-year (y/y) decline for CVs is increasing. Meanwhile, the overall growth rate across the industry is slowing.

The total market continues to be dominated by the state-owned conglomerates that have strong joint ventures (JVs) with established international automakers, which account for a major part of overall volume seen by these large groups. As can be seen from the pie chart (left), the SAIC Group, Dongfeng Group, FAW Group, Changan, BAIC and GAC continue to see the largest volume sales across the year-to-date (YTD) period, with strong control over the market. These large groups include both passenger vehicle and CV subsidiaries.

Data from CAAM show that overall volume sales for the groups are in stark contrast to those at the smaller OEMs which have no strong international JV partners to fall back on, and instead rely on in-house production capabilities to compete with some of the most successful global players. The result is fast deteriorating sales for a large section of the local players.

The passenger vehicle segment has produced 1.481 million units in August with sales of 1.4682 million units, growing 6.7% and 8.5% y/y. This segment continues to hold up the market, although the force it once had is weakening.

The top players in the passenger vehicle segment are led by the Shanghai Volkswagen (SVW) JV, followed by the FAW-VW JV; the Shanghai GM (SGM) and the SAIC-GM-Wuling (SGMW) JVs follow with Beijing Hyundai creeping up. The top 10 passenger vehicle OEMs continue to rise y/y.

The CV segment continues to fall. In August, a total of 247,397 units were sold in China, marking a month-on-month (m/m) drop of 4.94% and a y/y decline of 16.36%. On a YTD basis a total of 2.5 million CVs have been sold, marking a 5% decrease. The new National Level IV emission standards are to be enforced in 2015, and this has a two-pronged effect on the CV market. On one hand potential buyers want to buy new vehicles before the stringent measure is imposed early next year, but on the other hand the overall slowdown in the market has prompted many to overlook buying new CVs as current incentives from the government to part with existing and older vehicles are too low, while new truck prices are high. Meanwhile an increase in competition from European light truck makers has crowded out some potential sales for the Chinese brands.

A total of 77 CV makers are listed under the CAAM, of which the top 10 account for a large majority of total sales. The larger players in the CV segment continue to belong to the large conglomerates. However, a large proportion of CV players have had lower sales this year than in 2013.

Electric vehicles (EVs) are now beginning to decline in July and August compared to the sales record set in June. In August, a total of 6,175 alternative energy vehicles were produced; down 11.3% m/m. In June over 7,000 units were produced according to CATARC.

In August a total of 603 hybrid vehicles were produced and 5,572 new energy vehicles (NEVs) which by Chinese government definition include EVs and PHEVs. Of this, 4,923 units were passenger vehicles, 4,320 NEVs and 603 hybrid passenger vehicles. Meanwhile alternative energy coaches accounted for 1,030 unit sales of which all were NEV coaches. Meanwhile there were 222 special purpose NEVs produced. Passenger NEVs now regularly contribute majority of the total NEV market in China.

Outlook and implications

The IHS Automotive forecast analysts for CVs say that overall,

heavy truck sales in China are expected to decline by 1.8% to 1,041,800 units this year, and in 2015 sales will decrease further by 9.5% to 942,600 units.

The Chinese Ministry of Industry and Information Technology (MIIT ) announced in April that new emission standards would be implemented in China starting from 1 January 2015, so a mild advance purchase effect at the end of 2014 is expected, although overall sales of heavy trucks are expected to continue to slide for this and the following year.

However a bleaker picture will emerge for overall CV production levels as the new National Level IV emission standards are introduced in China in 2015, truck production is forecast to remain stagnant this year with sales plummeting 7.8% y/y in 2015.

In the light vehicle segment – which includes passenger vehicles and light commercial vehicles (LCVs) – IHS Automotive expects overall sales to rise with passenger vehicle sales rising faster. In 2014, we expect mainland China's light-vehicle sales to increase 8.9%, to 23 million units. Passenger vehicle sales are expected to rise 10.8%, to 17.9 million units, while LCV sales will grow 2.8%, to 5.3 million units. IHS does not include minibuses as passenger vehicles while the CAAM does.

Overall as there is a slowdown across the industry with growth rates lower than previously, demand for NEVs is unlikely to be strong unless further dramatic incentives are brought in. The vehicles continue to grow on the back of incentives but volume remains low.

The trends witnessed in the market continue to show that the large groups are seeing growth (see China: 19 September 2014: SAIC Group continues to lead China's ytd results as Great Wall, Chery, BYD, Geely, JAC report falls) while international automakers begin to expedite strategies to further garner sales in the lucrative premium car segment (see China: 22 September 2014: Nissan forms new JV for Infiniti; VW and GM plan China-specific models).