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China Autos Report Q1 2011
Business Monitor International, Nov 2010, Pages: 41
China Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's automotive industry.
Although vehicle sales growth in China is clearly slowing, at 17% in September, compared with 18% in August and 21% in June, the deceleration in demand has not been as rapid as expected in H210, and BMI has revised sales forecasts for both passenger and commercial vehicles upwards for 2010. This mirrors our Asia team's view that any economic slowdown in China is now likely to take hold in 2011 rather than Q410.
Total vehicle sales for the first nine months of 2010 were up 36% to 13.1mn units, led by 37% growth in passenger car sales, to 9.9mn units. Although this was a slight drop from the 40% growth in the first eight months of the year, the extension of incentives on car purchases to the end of the year has been enough to sustain healthy demand. By the end of 2010, we expect passenger car sales to be up by at least 28% to 13.2mn. Commercial vehicle sales of 3.2mn units for the nine months to September are already nearing the 3.31mn units recorded in the whole of 2009. By year-end 2010, we expect segment sales of 4.2mn units, with average annual growth of around 11% for the five-year forecast period. This will result in a total vehicle market of 17.4mn vehicles in 2010, which would see China retain its position as the world's largest market.
However, the China Association of Automobile Manufacturers has reported an increase in the country's vehicle inventory, doing little to alleviate concerns of overcapacity in the auto sector. As of the end of September, carmakers in China held 539,200 units in stock, up 35,100 units from the previous month. At the same time, the National Development and Reform Commission (NDRC) has reported a drop in vehicle prices for the third consecutive month and expects prices to fall further in Q410.
While there is concern in China that the auto sector will suffer overcapacity issues in terms of new vehicle production, we see battery producers capitalising on a huge battery replacement market, which becomes more lucrative as the country entrenches itself as the world's largest car market. Replacement purchases account for around 80% of battery demand. However, the risk is that new technology, even in the lead-acid battery market, is prolonging the life cycle of batteries, while lithium-ion battery packs for EVs and hybrids will become more commonplace from around 2012 onwards.
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