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Customer LoginsSame-Day Analysis: Chinese passenger vehicle sales to grow 5.4% y/y in 2016
The passenger vehicle market continues to be the main pillar for growth in the Chinese vehicle market, but with macroeconomic headwinds IHS expects calmer market growth in 2016.
IHS Automotive perspective
- Significance: In 2015, the passenger vehicle segment grew 8.9% y/y to 19.65 million units, but despite the government's "quick fix" policy, overall sales are expected to slow down in 2016.
- Implications: The sedan segment accounts for 60% of the passenger vehicle market, but the growth comes from the SUV segment.
- Outlook: IHS Automotive data show that the local Chinese brands have been the biggest beneficiaries of the SUV sales boom in 2015.
Sales of light vehicles in China hit 24.39 million units in 2015 according to IHS Automotive data, an annual market growth rate of 5.6% year on year (y/y). The passenger vehicle segment grew faster than the total market and is the main pillar behind the light-vehicle market growth. In 2015, demand for passenger vehicles grew by 8.9% y/y to 19.65 million units. However, light commercial vehicle (LCV) sales declined 6.1% y/y to a total of 4.7 million units.
The Chinese vehicle market's growth depends on the passenger vehicle market, which is in turn reliant on the fast-growing sport utility vehicle (SUV) segment. SUV sales increased 41.2% y/y in 2015, according to IHS Automotive data - which includes imports but excludes exports, and defines passenger vehicles to include only sedans, SUVs, and multi-purpose vehicles (MPVs). SUV segment sales of 6.8 million units account for 35% of the passenger vehicle market, but it is growing fast and the mainstay sedan segment is losing market share. Overall sales of sedans in China dropped 4.6% y/y to 11.79 million units in 2015. The sedan segment accounts for 60% of the passenger vehicle market. MPV sales in 2015 hit 1.03 million units, rising 22.2% y/y.
December 2015 showed an overall light-vehicle growth rate of 16.7% y/y with total sales of 2.7 million units. The sedan segment rose 5.3% y/y for a total 1.3 million units sold in December, and the MPV segment grew 20.7% y/y to 121,175 unit sales. The quickest growth came from the SUV segment, which grew 52.2% y/y to 842,012 units sold. LCVs were up 3.9% y/y to 471,447 units.
Domestic Chinese automakers have been the biggest beneficiaries of the SUV sales boom in 2015, capitalising on Chinese consumers' taste for less expensive SUV products. Annual SUV sales of local Chinese brands accounted for more than 50% of the total SUV market in 2015, our data show, and overall sales of Chinese-brand passenger vehicles have risen 30% y/y to 5.9 million units. This exceptionally strong, double-digit growth rate is far higher than the overall market growth.
Outlook and implications
The question is whether the solid double-digit growth in the final three months of 2015 sets a strong positive growth trend for 2016. Analysing the growth in the final months of 2015, what is apparent is the market's response to the government stimulus measure introduced on 1 October 2015, which effectively cut the new vehicle purchase tax from 10% to 5% for vehicles fitted with engines of 1.6 litres or smaller. Double-digit growth began in October 2015. In September 2015, the market grew 1.4% y/y with a total 2.03 million light vehicles sold. In August 2015, the market had declined 3.8% y/y, and in July the light-vehicle market had plummeted 6.8% y/y, sending shockwaves through the industry and the wider economy. Market forces alone could not be totally trusted to bring back growth, and the Chinese government stepped in with a "quick fix" purchase tax cut, a tried and tested policy to spur demand. The result was as expected - sudden double-digit growth. In October 2015, light-vehicle sales jumped 12.2% y/y to 2.19 million units sold, of which passenger vehicle sales rose 16.3% y/y to 1.84 million units.
Growth continued in November: the light-vehicle market was up 20.7% to 2.47 million units and passenger vehicle sales were up 25.4% y/y to 2.05 million units. In December 2015, the light-vehicle market was up 16.7% y/y.
In 2016, the market will continue to respond to the government stimulus policy, which is expected to be in place until the end of the year. In 2015 the government seemed to stop adding cities to the list of those with restrictions on annual vehicle sales. However, the overall macroeconomic headwinds point to a lower GDP than previously anticipated, and this will inevitably affect the vehicle market. Vehicle exports from China, once a growth factor, are in intense decline, and this is unlikely to change as policies in a number of export destinations have reduced the price advantage that Chinese-built vehicles used to have. Policies in markets such as Brazil, demanding a high local content rate to avoid high vehicle import taxes forces Chinese automakers to increase production in markets outside China rather than export. Currency devaluation is likely to have a positive effect on vehicle imports; however, growth of this segment has been severely dented by the government's anti-corruption campaign which also opposes conspicuous consumption and pushing sales of domestic brands.
IHS Automotive is issuing a cautious forecast for a moderate 5.4% y/y increase in passenger vehicle sales in China to 20.7 million units, as macroeconomic headwinds and a slower GDP growth rate of 6.3% are expected to slow growth despite the tax cut incentive. Overall the light-vehicle market is expected to gain 4.6% y/y in 2016 to 25.51 million unit sales, according to our current forecasts.
Sales of locally produced vehicles rose by 4.7% y/y across the total vehicle market, according to data from the China Association of Automobile Manufacturers.
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.