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China Autos Report Q1 2012
Business Monitor International, Nov 2011, Pages: 56
Business Monitor International's 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.
As BMI expected, new regulations designed to engineer a cooling off of the earlier rapid sales growth have contributed to a slowdown during 2011. However, by September 2011, new car sales were following an upward trend, achieving higher y-o-y growth for the fourth consecutive month. Sales of passenger vehicles, including SUVs and minivans, were up 8.8% to 1.32mn units for the month, following on from growth of 6.2% in June, 6.7% in July and 7.3% in August. Much of the growth was generated by incentives offered by dealers before the country's National Day holiday period, which means BMI is cautious about the prospects of a full recovery and its forecast for 5% growth in passenger vehicle sales in 2011 still stands.
There was less cause for optimism in the commercial vehicle segment, which posted a decline of 5.9% yo-y in September, according to the China Association of Automobile Manufacturers (CAAM). This has been attributed to a slow truck market, particularly as light commercial vehicles (LCVs) and minibuses showed some improvement. Although LCV sales were still down 1.5% y-o-y, they were 24% higher than sales in August. Minibus sales rose 1% y-o-y to end a seven-month negative growth streak. Based on commercial vehicle sales of 3.1mn units for the first nine months, BMI has accordingly revised its forecast for commercial sales growth in 2011 downwards to a decline of 3%, which results in sales of 4.17mn units compared with the previous projection of 4.55mn.
Looking ahead, a greatly reduced list of model options eligible for subsidies coupled with the ongoing restrictions on new vehicle registrations in certain big cities will dampen car sales demand in 2012. There are already signs of the used car segment growing in significance, as second-hand sales in Beijing were higher than new car sales for the first time ever in September 2011. As such, BMI has lowered its 2012 sales forecast for the passenger segment to growth of 8%, which would equal sales of 15.6mn units. BMI also believes the commercial vehicle segment will suffer from reduced access to credit for businesses.
Motorcycle producers are also facing restrictions on growth potential. There is undoubtedly demand for luxury vehicles in China, despite the slowdown in overall autos sales. However, iconic US brand HarleyDavidson will face regulations on motorcycle use, which are not an issue in its other target markets. Several major Chinese cities, including Beijing and Shanghai, ban motorcycles in areas with elevated highways and on certain streets to cut down on noise. This could have serious implications for a market where the firm plans to increase its sales by 40% by 2016. While targeting the rural population as a new area for growth opportunities may be an option in other vehicle segments when the bigger cities are slowing down, this is not really a viable strategy for a maker of premium motorcycles, which can cost as much as a mid-range car. The case is not helped by import tariffs of around 30% on top of purchase taxes.
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