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Customer LoginsSAIC, Dongfeng, FAW lead market growth but Changan sales slip in May − CAAM
China's state-owned automakers continue to lose and gain sales according to the performance of their joint ventures with international automakers.
IHS Automotive perspective
- Significance: China's overall automotive market has done well in May, with growth inching towards a double-digit percentage rise, although not all players shared in this strong expansion.
- Implications: As international brands strengthen their line-ups of China-produced models they are gaining back market share from Chinese brands, which are posting slower rates of increase.
- Outlook: The Chinese passenger car market is a complex and dynamic playing field where automakers cannot rely on brand loyalty to win sales.
May has been a good month for vehicle sales in China with overall market growth of 9.87% year on year (y/y) and more than 2.09 million vehicles sold in the month, according to wholesale data from the China Association of Automobile Manufacturers (CAAM). Despite the strong y/y increase, the volume of sales edged down 1.45% from April. Year-to-date (YTD) sales totalled 10.76 million units with a growth rate of 6.96% y/y.
But some automakers' figures have been hit by rising competition within China's passenger car segments. International auto brands are also focusing to further localise marketing campaigns, strengthen brand awareness, offer price cuts, and fine-tune models for local consumer tastes to win back market share from Chinese brands, which have expanded sales through relatively cheaper models in fast-growth segments such as sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs). As international brands begin to cut prices and bring in more models, Chinese brands' growth is slowing.
The top players in China's auto market remain the large state-owned conglomerates, which have joint ventures with international automakers. SAIC Group continues to lead the market with total wholesale deliveries in May up 7.53% y/y to 464,930 units. On a YTD basis, SAIC's sales climbed 5.48% y/y to 2.54 million.
Dongfeng Motor's May sales rose 4.74% y/y to 332,641 units, with YTD sales up 2.53% y/y to 1.59 million. FAW Group posted sales in the month up 11.44% y/y to 254,395 units, and in the YTD up 6.52% y/y to 1.25 million. Chongqing Changan Automobile's wholesale deliveries in May slipped 4.89% y/y to 207,493 units, with its YTD sales up 1.55% y/y to 1.27 million. Fifth-placed BAIC Group's sales surged 23.57% y/y in May to 228,285 units while its YTD sales improved 4.53% y/y to 1.07 million.
Outlook and implications
The Changan Group's YTD y/y growth rate of just 1.55% could slip into decline without growth in the next few months. The BAIC Group, meanwhile, stands out for its recent leap in sales, while its YTD Y/Y growth rate remains in single digits.
Both groups' performances hinge on their joint venture partners. Changan's main challenge at the moment is that sales for the Changan Ford (CAF) joint venture are faring less well than a year ago. Ford's sales in China have now fallen for two consecutive months, which has been attributed to factors including its models on offer. The once high-selling Ford Focus sedan has lost its position in the segment and Ford also needs more new models to counter the sudden surge in new models from competitors. Ford dealers have also been in the spotlight over their stand against high inventory, affecting wholesale deliveries. In addition, Ford has announced maintenance work at its plant in Chongqing.
Ford has shuffled its management to bring in Nigel Harris, who was previously head of sales at Ford China and has since gained experience in markets such as India, where he was president of Ford. Harris will return to China as head of the Changan Ford joint venture and will aim to push its sales, which slipped 11% y/y in April and 0.4% y/y in May. Meanwhile Ford may reportedly also produce its premium Lincoln brand in China, although this would not take place until after 2018 as supplier sources state no request for quotations (RFQs) have yet been issued for Lincoln models in China. But Ford aims to boost sales of Lincoln models and has therefore brought in Amy Marentic to head up Lincoln China.
BAIC meanwhile has begun to gain from the rapid growth of Hyundai models produced under its Beijing Hyundai joint venture in China. Premium Mercedes-Benz sales in China have also contributed to BAIC's growth. As models produced under its joint ventures flourish, the SOE is reaping the rewards.
Hyundai has begun to witness a surge in sales for its Tucson SUV. Overall Hyundai has reported a 25.4% y/y leap in May sales, with deliveries in China topping 100,000 units in the month, following a 6.7% y/y improvement in April. Hyundai has been gaining from increased market penetration in China on better brand awareness. The surge in brand awareness stems from the company's placement of the Tucson SUV in a popular Korean TV drama also aired in China. Now Hyundai plans to expand its local line-up with locally produced hybrids.
Mercedes has reported a double-digit percentage rise in sales in May, with sales up almost 40% y/y, following a 21.7% y/y jump in April. With the momentum of sales rising for the German premium brand, Daimler is further strengthening its partnership with BAIC. It has announced an expansion of its engine plant in China and pushed for further product enhancements through BAIC's entry into the joint venture between Daimler and Fujian Motor for producing commercial vans in China. BAIC now owns a 35% stake in Fujian Benz.
Overall, the CAAM data show that demand for passenger vehicles continues to drive the China market, with SUVs still the main growth engine. In May, however, sedan sales also began to edge up on the back of new offerings released to the market at the Beijing Motor Show in April.
Development by brands
In May, the battle for market share intensified as many new models launched at the Beijing Motor show have now entered the market. International brands are also gaining back some lost market share, slowing the rise in market share for Chinese brands.
On a YTD basis, sales of models from Chinese OEMs rose 22.4% y/y to 2.9 million units in the PV segment (as defined by IHS, including only sedans, SUVs, and MPVs). Chinese brands now account for around 33% of the PV market in China, up from 28% in the same five-month period a year ago. In May, however, Chinese-branded PV sales rose 16.3% y/y to about 490,000 units, accounting for about 28.8%.
According to the CAAM, the trend of a slowdown in Chinese brand growth is also apparent. Despite the PV segment's overall growth, competition between automakers for market share has damped the rate of increase for Chinese brands. A total of 717,000 Chinese-brand PVs were sold in May, up 12.9% y/y and now accounting for 40% of the PV segment as defined by the CAAM. In the sedan segment, Chinese brands sold 160,000 units in May, accounting for 17.4% of the segment and down 8.2% y/y. A total of 335,000 units of Chinese-brand SUVs were sold in May, up 40.2% y/y and accounting for 53% of segment sales. Chinese-brand MPV sales hit 158,000 units in May, up 31.9% and accounting for 87.5% of the segment's sales.
On a YTD basis, the volume of Chinese-brand PV sales hit 4.02 million units in May, up 10.9% y/y and accounting for 43.4% of the PV market. Of these, Chinese-brand sedan sales totalled 891,000 units, down 17.7% y/y and accounting for 19.2% of the segment's sales. Chinese-brand SUV sales hit 1.82 million units, up 50.5% y/y and accounting for 56.7% of segment sales. Chinese-brand MPV sales totalled 936,000 units, up 18.3% y/y and accounting for 90.9% of the segment. When compared with the preceding month's data, the share of Chinese brands edged down in most segments in May.
Meanwhile, China's vehicle exports continued to post a y/y decline, falling 20.9% y/y to 56,000 units in May, although up 4.5% from April's figure. PV exports totalled 36,000 units, marking an annual increase of 5.2% y/y, while CV exports reached 20,000 units, down 39.2% y/y.
Once again in May, and indicative of the start of a trend, PV exports improved. This is the second month of growth for PV exports, which in April rose 5.2% y/y to 34,000 units. On a YTD basis, vehicle exports in May slipped 22.2% y/y to 246,000 units, with PV exports down 10.3% y/y to 157,000 units and CV shipments down 36.9% y/y to 89,000.
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.