Auto analysts question the future of Chinese auto sales

Auto analysts at IHS Markit are questioning the future of Chinese auto sales, given steady declines over the past 12 months.

Total light duty vehicle sales in China  were down more than 10 percent over the past 12 months (July 2018-June 2019) from the prior 12-month period.

A new mobility and energy future report from IHS Markit, entitled China’s Auto Sales: Why Have They Fallen As Much as They Have? identifies factors that have contributed to the China’s auto sales slowdown.

• Less availability of auto loans in China
• Dealer destocking
• Accelerated transition to China 6 emission standards-compliant
• Tax policy changes
• Growth of ride hailing
• Trade War with U.S

The one bright spot amid the downturn has been electric vehicles (EVs), the analysis says.

New registrations of EVs and plug-in hybrid electric vehicles in China rose at a monthly average of 85 percent during July 2018-March 2019 compared to year-earlier period.

However, EV sales are not enough to offset the significant declines in internal combustion engine vehicles.

IHS Markit does expect LV sales in China to eventually stabilize and return to positive growth in the coming future, with average annual gains of about 3 percent in 2020-2025, by comparison, annual gains averaged 7 percent from 2011-2017.

Should the decline in auto sales be more protracted than it is now, it would likely prompt a fundamental reassessment of automakers’ strategies, according to the analysis.

“This is a substantial correction but the expectation still is that some short-term market distortions will clear up as the contributing factors dissipate,” said Jeff Meyer, director, IHS Markit. “Recent data on final consumer demand is at last indicating that the market may be at or nearing a bottom. But should the decline be more protracted, it could prompt a fundamental strategic reassessment by automakers for what, up to now, has been the world’s biggest growth engine for auto sales.”