Statistics and analysis of domestic automobile production and sales in the first three quarters of 2018

Last Friday, the China Association of Automobile Manufacturers released statistics on domestic automobile production and sales in September and the first nine months. Unsurprisingly, the production and sales of automobiles in September dropped significantly year-on-year, continuing the downward trend since July, and fell for three consecutive months.

Although the Geely, Chery, Great Wall, BYD, FAW-Volkswagen and other auto manufacturers performed well in September, overall, although the auto market in September was much better than that in August, it still fell 11.6% year-on-year. Judging from the situation in the past two weeks, the situation in October is not optimistic. This year's "Golden September and Silver 10" is likely to be a soup.

Domestic auto market fell for three consecutive months

According to statistics from the China Automobile Industry Association, automobile production and sales in September totaled 2.356 million units and 2.394 million units, up 17.8% and 13.8% from the previous month; down 11.7% and 11.6% year-on-year, and the production-sales ratio was 101.6%.

From January to September this year, the automobile production and sales both completed 20.491 million units, an increase of 0.9% and 1.5% year-on-year. The growth rate of the previous eight months dropped by 1.9 and 2 percentage points respectively. The growth rate continued to fall, and the overall performance was lower than expected at the beginning of the year.

At present, domestic passenger car sales account for more than 84% of the total. Statistics show that the production and sales of passenger cars in September completed 2.025 million and 2.06 million, an increase of 18.7% and 15.1% from the previous month, down 11.9% and 12% year-on-year. Production and sales fell for the third consecutive month. This trend has not been seen for many years.

In the first nine months of this year, it was able to maintain a slight growth, mainly due to the strong performance of the auto market in the first half of the year, partially offsetting the decline in the third quarter, resulting in a 1.5% year-on-year increase in sales in the first nine months.

The statistics of the China Automobile Association are wholesale numbers and cannot fully reflect the real situation of the market. According to the retail sales data compiled by the relevant departments according to the traffic insurance, the wholesale sales volume in the first eight months of this year was nearly 1.6 million more than the retail sales. According to retail data, the Chinese auto market has experienced negative growth in the first nine months of this year.

The three major reasons for the downturn in the auto market

The China Automobile Association analyzed that the lack of consumer confidence, the plunge in the stock market, and the tension between China and the US trade friction are the three major reasons for the continued downturn in the Chinese auto market.

The domestic auto market in the third quarter of this year is a bit like the domestic auto market in the second half of 2018. At the time of the international financial crisis, due to lack of confidence, the domestic auto market continued to slump. Until the beginning of 2019, the state introduced the automobile industry revitalization plan, and halved the car purchase tax, encouraged the old-for-new, and the car to go to the countryside, which reversed the trend.

China is the world's largest automobile consumer market. Almost all multinational auto giants in the world have joint ventures in China. The largest market for many multinational auto companies is in China. The Chinese auto market is sneezing, and the global multinational auto giants are also catching a cold.

The Chinese auto market is in a downturn, and multinational auto companies are also nervous because they rely on the Chinese market for global growth. Volkswagen Group said its Volkswagen brand sales in China fell 10% in September, dragging down Volkswagen brand global sales by 20%.

Jaguar Land Rover announced that its largest plant in the UK will be discontinued for two weeks due to weak demand. The Indian Tata Group, which wholly owns Jaguar Land Rover, was affected by this and its share price fell 15.7% in the Mumbai market. Jaguar Land Rover blamed the closure of the England factory in the Chinese market, where sales fell sharply.

General Motors, the largest auto company in the United States, announced that its sales in China and its joint ventures in China fell 14.9% year-on-year in September, down 2.5% year-on-year in the first nine months. China is the largest market for GM, and the decline in the Chinese market has seriously affected GM's global performance.

Ford Motor's sales in China fell sharply this year, down 30% from January to September. Affected by China's performance, Ford Motor launched a large layoffs.

There may be negative growth throughout the year

Due to too many uncertain factors, the three major reasons for the downturn in the domestic auto market are difficult to eliminate in the short term. If there is no major policy, the market situation in the fourth quarter is not optimistic.

According to the statistics of the China Automobile Association, sales in the last three months of 2017 were 2.704 million, 2.958 million and 3.06 million respectively. In the fourth quarter, a total of 8.722 million vehicles were used, with an average of 2.907 million vehicles per month. In the first nine months of this year, the average monthly sales volume was only 2.277 million.

Due to the high base in the fourth quarter of last year, it is basically impossible to sell more than last year in the current downturn. Even if the introduction of incentives for car consumption, if the launch is too late, the pull of the annual sales is limited.

Nomura Securities expects passenger car sales in China to fall by 7.5% year-on-year in the fourth quarter of this year, resulting in a 1.6% decline in sales for the full year. This will be the first decline in the annual sales of the Chinese passenger car market since 1990.

China has been the world's largest auto producer and the largest new car market for nine consecutive years, with more than 200 million cars. In 2017, China’s car sales were close to 29 million. With such a large base, it is already difficult to grow even larger. The United States is the country with the largest number of cars in the world. It has been the world's largest new car market for many years. The annual peak of new car sales in the United States is 17 million.

Some analysts believe that under such a high base, the annual decline in car sales is also normal. However, it must be noted that the rigid demand for Chinese automobile consumption will exist for a long time.

Chinese cars just need to exist for a long time

The Traffic Management Bureau of the Ministry of Public Security announced that as of the end of June 2018, the number of car ownership in the country reached 229 million, including 180 million private cars. Some analysts believe that according to the current growth rate, by 2020, China's car ownership will exceed 250 million. In a few years, you can surpass the United States and become the world's largest car-holding country.

With the rapid expansion of China's car ownership, the peak of the car has arrived, providing a rich source of cars for the used car market.

In the first nine months of this year, the number of used cars in China reached more than 9 million, and will reach 12 million in the whole year. The healthy development of the used car market has on the one hand expanded the scale of car transactions and on the other hand made room for new cars.

With the expansion of car ownership, the number of cars scrapped each year is also considerable. According to international practice, the number of scrapped cars per year accounts for about 6% of car ownership. The sharp increase in domestic car ownership has been concentrated in the past decade, and a large number of cars have quickly reached the end of their life cycle.

According to the prediction of relevant departments, the number of cars scrapped in the country should reach 9 million in 2018, and will exceed 10 million in the next few years.

If 10 million vehicles are scrapped each year, plus 12 million vehicles will flow into the used car market, and with the addition of millions of new cars, domestic new car sales will exceed 27 million vehicles per year. With the increasing export of automobiles, the annual sales volume of Chinese automobiles is likely to remain at around 30 million for a long time.

Despite the temporary difficulties, the domestic auto market is in a downturn. But in the long run, the rigid demand for Chinese cars will exist for a long time, and the prospects are still bright.

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