July 8th – 12th Newsletter 11

Are car sales up, or down, in China last month?

This week the Chinese media reported that sales were down in July, however it should be pointed out that Chinese media and outlets seem to prefer to count month to month sales which of course leads to some confusion. Different seasons, weather patterns, local customs and financial issues can lead to major changes in the car buying industry so it is wise to do a year on year comparison rather than a month to month comparison, the majority of car companies work this way but the press seem to prefer the bold market down or market up headlines – of course this does not work in the real world. On a year to year comparison the Chinese market was actually up by a marginal 2.18% over July 2010.

Sales in July reached 1.27 million cars whilst production stood at 1.30 million units, production actually fell from June by 6.96% and 11.19% respectively, but increased year on year by 1.26% and 2.18%. In the first seven months of 2011 over 10 million cars were produced and sold in the Chinese market, which is an increase of 2.33% and 3.22% over the same period in 2010.

So what were the best selling cars in July? It’s bad news for Chinese manufacturers as none of their models got into the top ten. The best selling models were Toyota Corolla (18,800), Buick Excelle (18,400), VW Bora (17,200), Chevrolet Cruze (16,400), Toyota Camry (15,900), VW Santana (15,500) VW Jetta (15,400), Chevrolet Sail (15,100), Nissan Sunny (14,900) and the Elantra Yue Dong (13,300). The top ten selling vehicles in China accounted for 22% of the market in July alone.

So what will made the Chinese car market drop in 2011? All fingers are point at a lack of subsidies and the return of a higher tax bracket on the sub 1.6L cars which has largely been blamed for a slump in sales in urban environments. Rural buyers stopped buying cars when the cars to the countryside program which gave rural buyers a healthy subsidy to buy cars was ended at the end of 2010. Rural buyers mostly bought mini vans and mini trucks which were used in the delivery of goods from rural areas into cities, this affected many major minivan manufacturers such as GM’s Wuling, Chang’an and Hafei in 2011 after their excellent sales results in 2010. Other manufacturers that entered the minivan market in 2011, such as Lifan and SouEast, did not see a major sales rise or fall, partly owing to their late arrival, BYD actually suspended in own minivan range as the supportive policies were suspended.

Will anything change in 2012? The Chinese government introduce a green car subsidy in 2011 which was set to give subsidies to fuel efficient cars, however the standard was set quite low and many cars were able to achieve the standard, for 2012 the rules are expected to change to a higher level, with cars achieving 6.9L (roughly 41mpg) or better being awarded the 3000rmb subsidy. China is not expected to introduce any sort of American styled CAFE measures in the meantime as it would affect home grown auto makers to a large extent and could potentially force them out of the market.