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Customer LoginsChina's market production rises 7.99% y/y in Q1 as OEMs push new models
Automakers have introduced a number of new features to existing models in an attempt to gain market traction in China, while local automakers are gaining share from launches of new models.
IHS Markit Perspective:
- Significance: Chinese automotive brands are pushing their presence in the country's market by bringing in more new models in the SUV and MPV segments.
- Implications: Chinese brands' sales in the passenger vehicle segment account for 33.4% of the market, with 760,000 units sold in March alone, IHS Markit data show.
- Outlook: With overall growth witnessing slower rates of increase, automakers aim to gain from launching new and tweaked products to attract consumers in the interior and lower-tier cities of China.
Automakers have used the first quarter of the year to increase their product line-ups in China to gain traction in a market that is witnessing slower growth rates. In China's relatively fickle consumer market, new models tend to entice buyers who want the latest and newest products. For automakers, if this is not always possible, tweaking of models to create long-wheel-base (LWB) variants or 'refreshed' models is part of the strategy to keep the models in the limelight. In addition, other automakers bring in new models in a bid to gain share in China. Automakers are displaying their new products at the ongoing Shanghai Motor Show.
In the first quarter, China's vehicle market, including the passenger vehicle (PV) and commercial vehicle (CV) segments, witnessed total production of 7,133,053 units, marking a 7.99% year on year (y/y) increase from 6,605,363 units in the same quarter last year, according to wholesale data from the China Association of Automobile Manufacturers (CAAM). Production volumes in March rose 20.58% month on month (m/m) to 2,603,972 units.
In the first quarter of 2017, wholesale sales of vehicles in China hit 7,002,029 units, marking a 7.02% y/y increase. Meanwhile, sales in March were up 31.31% m/m and 4.23% y/y to 2,542,914 units.
The market continues to be led by the SAIC Group with a production volume of 1.7 million units in the first quarter, marking an increase of 1.56% y/y. Sales for the group hit 1.65 million units in the first three months of the year, up 3.33% y/y. Dongfeng Group followed with production of 1.04 million units in the first quarter, up 8.04% y/y, while sales reached only 947,591 units, up just 1.07% y/y.
FAW Group was in third place with production of 835,921 units in the first quarter, an increase of 15.42% y/y, and sales were 831,338 units, up 12.87% y/y. Ranked fourth was Chongqing Changan Automobile Group with production of 734,938 units, a decrease of 6.11% y/y, while sales were up 0.02% y/y to 838,728 units. BAIC Group was in fifth position with production of 682651 units, up 11.18% y/y, in January‒March and sales reached 617,053 units, up 0.88% y/y.
These top five state-owned conglomerates have witnessed an overall increase in production levels as their own brands as well as their brands under joint ventures with international automakers have begun to build more models in China, but demand so far has been relatively subdued.
However, the results for the next group of automakers is in sharp contrast. Guangzhou Automobile Group Corp (GAC) produced a total of 461,741 units in the first quarter, an increase of 30.99% y/y, while sales rose 34.65% y/y to 456,746 units. Geely Automobile witnessed a production volume of 282,134 units in January‒March, a 100.13% y/y increase, while sales reached 284,695 units, up 98.29% y/y. Great Wall produced 236,584 units in the first quarter, up just 2.57% y/y, and sales were up 8.88% y/y to 254,149 units. Brilliance witnessed declines in sales and production in the first quarter, while Chery Automobile was another automaker that witnessed solid growth with production in the quarter up 21.66% y/y to 164,147 units and sales of 161,570 units, up 23.72% y/y.
Outlook and implications
The trend in China is continuing to grow of local automakers gaining traction in the market at a faster rate than their international counterparts, which are now fast trying to deliver so-called 'new' models but are struggling to do so beyond the LWB and refreshed variants of existing models. Meanwhile, Chinese brands have been able to deliver new products and continue to gain share in the local market, thereby forcing forecasters to rethink their positions in their home terrain.
IHS Markit vehicle production data show that, between December 2016 and April 2017, a total of just 52 models had 'start of production' (SOP) in China, relating to new models introduced to the market. Of these, 30 models were from local Chinese brands, accounting for 57% of the new models introduced. The majority of the models introduced by local auto brands in the first quarter were sport utility vehicles (SUVs).
International automakers are also once more bringing in more SUVs to gain in China's market, but at the Shanghai Motor Show what was evident was also an increase in releasing existing models tweaked for China. In a market where brand loyalty is in its infancy, consumers are often swayed to 'new' products from brands now gaining traction in the smaller cities, what are referred to as the lower-tier cities in China. It is this market that both local and international brands now aim to gain traction in, which is also why there is a new interest in the pick-up truck segment, with SAIC's Maxus Datong launching the T60, while Ford has brought in its Ranger pick-up with the probable aim of production in China.
Meanwhile, the MPV segment is witnessing an increase in larger family-size products on offer, as is the larger D-SUV segment, which includes existing smaller SUVs tweaked to be longer variants. For example, Volkswagen (VW) has introduced longer variants with the Tiguan L SUV and Touran L MPV, while Great Wall has introduced the Haval H7 and the Haval H7 L. Meanwhile, General Motors (GM) has introduced the 'refreshed' Buick Regal sedan at the Shanghai Motor Show.
In March, the sales of domestic auto brands in China rose by 18.9% y/y to 0.76 million units, with their market share rising to 38.5%. In the first quarter, overall sales of Chinese brands' models hit 2.18 million units, up 17.1% y/y. This is a strong indication that the market reception of local brands' products and, in particular, SUVs, has been higher than expected. Therefore, our estimates of the market share of local brands' sales in China has now been lifted.
The demand for Chinese brands' models is also highlighted in the CAAM data, which show that, of the total PVs sold in March, around 957,000 units were Chinese brands' models, an increase of 7.3% y/y. In the sedan segment, Chinese brands accounted for 19.9% of the market; however, this represented an overall volume decline of 0.9% y/y. In the SUV segment, sales of Chinese brands' models hit 510,000 units in March, an increase of 30.3% y/y and accounting for 61% of the total. In the first quarter, the market for Chinese SUVs continued to grow, with sales at 1.48 million units, up 28.9% y/y and accounting for 62.4% of the segment.
Please note, the CAAM includes minibuses in its definition of PVs, while IHS Markit does not.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.