China'S Auto Sales Will Drop 8.2% In 2019 And Stabilize This Year And Next

On January 13, China Automobile Industry Association (hereinafter referred to as "CAAC") released sales data in 2019, which showed that in 2019, China's automobile production and sales completed 25721000 and 25769000 vehicles, down 7.5% and 8.2% compared with that in 2018. Among them, the production and sales of passenger cars were 21.36 million and 21.44 million, down 9.2% and 9.6% year-on-year.

In the second half of 2018, China's auto market began to show a turning point, experiencing the first negative growth since 1990. In 2019, the auto market continued to decline, and now it has been declining for 18 consecutive months.

It is worth noting that in 2019, the production and sales of new energy vehicles will be 1242000 and 1206000, down 2.3% and 4.0% respectively. This is the first time that the annual production and sales of new energy vehicles have shown negative growth in the past decade.

In 2020, the car market is still not optimistic. On January 13, Xu Haidong, Assistant Secretary General of the China Automobile Association, said in an interview with the 21st century economic report that China's auto market is expected to grow by 2% in 2020, while the new energy vehicle market is basically flat with that in 2019.

In the second half of 2018, China's auto market began to show a turning point, suffering the first negative growth in 28 years since 1990. -Photo by Gan Jun

This year and next

Affected by multiple factors, China's car market continued to decline. Wang Qing, deputy director of the market economy Research Institute of the development research center of the State Council, told the 21st century economic reporter that the decline of China's automobile market in 2019 is the result of the superposition and resonance of multiple factors, such as house price, household leverage ratio, switching between five countries and six countries, and declining subsidies for new energy vehicles.

According to CAAC data, the decline in China's auto market began to narrow in the second half of last year. In December 2019, China's monthly sales of 2.658 million vehicles narrowed to 0.1%, while the output increased by 8.1% to 2.683 million.

However, this is mainly due to the low impact of the market base in December 2019, which is still significantly behind the high level of 3 million vehicles in 2017. Although the market climate index in the fourth quarter was better than that in the first three quarters, there was no obvious sign of recovery.

Under the influence of macroeconomic stability, consumer employment and consumption damage and other factors, the car market is difficult to reverse in the short term, and the market will also experience a period of bottoming out period. However, a number of industry experts told the 21st century economic report that compared with 2019, the market decline in 2020 will be significantly narrowed.

Xu Haidong believes that in the next three years, China's automobile consumption curve will still maintain the "L" shape development trend, and it is difficult to have a "V" shaped reversal.

During this period, without the intervention or influence of external forces, the annual sales volume of China's automobile market will fluctuate among micro growth, zero growth or micro negative growth.

"Since the second half of last year, with the orderly adjustment of enterprises and the gradual implementation of relevant policies to promote consumption, the production and sales of automobiles have gradually narrowed year on year. This year's production and sales may have a slight negative growth or zero growth. This year or at the latest next year, China's automobile production and sales will enter a period of bottoming and stabilizing, and there is still room for development in the future. " On January 11, Miao Wei, Minister of the Ministry of industry and information technology, said at the high level Forum (2020) of China electric vehicle 100 people's Congress.

In the long run, China's auto market still has huge growth space and market potential after this round adjustment.

"Although China's automobile market is in a transition period from medium high speed to medium low speed, there is still a potential growth rate of 1.5% - 2% in the next decade." Wang Qing said that by 2028, China's car ownership is expected to be about 410 million, the production and sales scale of new cars will be 33 million, and the car ownership of 1000 people will be about 290.

It is worth noting that in 2019, affected by the decline of subsidies, China's new energy vehicle market will decline for the first time in nearly ten years.

This makes the auto industry pay attention to the adjustment of subsidy policy in 2020. On January 11, Miao Wei, Minister of the Ministry of industry and information technology, said at the high level Forum (2020) of China's 100 people's Congress of electric vehicles that subsidies for new energy vehicles would not further decline on July 1, 2020. Relevant people from the Ministry of industry and information technology further explained that in order to stabilize market expectations and ensure the healthy and sustainable development of the industry, the subsidy policy for new energy vehicles this year will remain relatively stable and will not decline sharply.

To a certain extent, this will consolidate the confidence of automobile enterprises to continue to develop new energy vehicles. However, Chen Shihua, Deputy Secretary General of CAAC, believes that new energy vehicles will still face great pressure in 2020.

"Although the changes in our subsidies may not be particularly large, I think consumers have not fully recognized the new energy vehicles, and there are no policies in other areas that are particularly conducive to or stimulating the development of new energy vehicles. I think we should be cautious and optimistic about the car market in 2020. " "The state is also looking for ways to promote new energy vehicles, and we hope that these policies will be introduced as soon as possible to ensure that the whole industry will continue to show positive growth in 2020," Chen said

Consumption gap intensifies differentiation

As the auto market goes down, auto companies are generally facing great business pressure. According to the data of CAAC, the growth rate of economic benefits of key enterprises is lower than that of the same period. In the first 11 months of 2019, the operating income of key enterprises fell by 4.3%, but the total profit decreased by 16%. Chen Shihua said that this is mainly due to the intensified market competition, some car companies "trade for the market" at the expense of profits, and the price war between automobile enterprises has intensified.

It is worth noting that under the intense competition brought by the continuous decline of the auto market, different auto companies have gone out of different market curves.

In fact, since 2018, there has been a sharp decline in automobile demand, showing the coexistence of structural and aggregate characteristics. Specifically, this year's automobile consumption is mainly in the market below the third and fourth tier cities and the new car market below 100000 yuan. The market in the first and second tier cities is stable, and the high-end car market is growing, showing an obvious "consumption gap".

Due to the different sensitivity of consumption expectation of different income groups to macro-economy, different automobile market segments show different trends. Wang Qing believes that this is due to the rapid rise of residential mortgage leverage in third and fourth tier cities, which has an inhibitory effect on automobile consumption.

Due to the impact of consumption upgrading, in the future, the demand for low-end models will be transformed into the demand for high-end models, and the market will be polarized.

During last year's Guangzhou auto show, when 21st century economic reporter interviewed senior executives of Mercedes Benz, Audi and BMW, luxury brands were generally optimistic about the future trend of China's luxury car market.

"For many years, the growth rate of luxury car market has been higher than the average growth rate of passenger car market, but now the proportion of luxury car market is only 11% and 12%, while that of developed countries can reach 25% and 30%. With the growth of people's living standards and more entry-level products of luxury cars entering the market, luxury car manufacturers still have a lot of market space in the future, with great potential and opportunities to increase their share. " Duan Jianjun, chief operating officer of sales and marketing of Beijing Mercedes Benz Sales Service Co., Ltd.

According to the data released by various auto companies, in the high-end car market, the sales of luxury brands such as BMW, Mercedes Benz, Audi, Lexus, Volvo, Porsche and Tesla have all achieved high growth; Japanese brands such as Toyota and Honda have also risen against the trend, and the sales of French cars and Chinese independent brands have declined most obviously.

Among the large domestic automobile groups, SAIC Group's sales decline is the most obvious. According to the production and sales express disclosed by SAIC Group, the cumulative sales volume of SAIC in 2019 is 6.238 million, a year-on-year decrease of 11.5%. SAIC Volkswagen, SAIC GM, SAIC GM Wuling and SAIC passenger cars have all declined to varying degrees. Among them, SAIC-GM and SAIC-GM Wuling declined by nearly 20%.

Some people in the industry pointed out that SAIC GM Wuling's sales decline was mainly caused by insufficient market demand in the third and fourth tier cities and rural areas. The main reason for SAIC GM's decline was that the Chevrolet brand had the worst sales volume in China in the past 10 years, and the brand also focused on the low-end market of about 100000 yuan.

Survival of Chinese brands in dilemma

Since the second half of 2018, China's auto market has experienced a top-down price system adjustment.

Recently, the 21st century economic report reporter visited many 4S stores and learned that almost all brands are carrying out different degrees of price reduction and promotion.

A staff member of a Mercedes Benz 4S shop in Haidian District of Beijing told reporters that the price of Mercedes Benz gla has dropped to about 200000 yuan, and A-class cars can be given a discount of about 180000 yuan. BMW, Audi and other brands are the same, and the price of entry-level compact models has entered the range of less than 200000 yuan. The price reduction of X3, q5l and other major models is around 50000 yuan. Volvo XC60, S90 and other models also have a large margin of discount. Most Land Rover models are priced at around 70-80% discount.

The price reduction of luxury brand cars causes market pressure to mainstream joint venture vehicles, and joint venture brands transmit price pressure to independent brands.

According to the data of CAAC, in 2019, the sales volume of self owned brand passenger cars was only 8.407 million, a year-on-year decrease of 15.8%, accounting for 39.2% of the total sales volume of passenger cars. The decline rate of independent brand passenger cars is higher than the overall level of the car market, and the living space is further limited.

Some independent brands are trying to keep their market share. Wei Jianjun, chairman of Great Wall Motors, said that "even if profits are allowed, the market will not be allowed". In 2019, the sales volume of Great Wall Motors will slightly increase by 0.69% to 1.06 million vehicles. However, the company's net profit in the first three quarters of 2019 decreased by 25.7%. Geely Automobile, the champion of independent brand sales, has a net profit decrease of 40% to 4 billion yuan in the first half of 2019.

"Generally speaking, the market share lost by independent brands is relatively large. The main reason is that with the economic transformation and upgrading, the income of some small and medium-sized enterprises and their employees has been affected, which happens to be an important consumer group of China's independent brands. " Xu Haidong told reporters of the 21st century economic report.

However, he believes that in the process of transformation and upgrading, China's independent brands are also constantly improving, and the product competitiveness of some leading independent brand enterprises is gradually improving, narrowing the gap with joint venture brands.

Geely and great wall have actively participated in the competition with joint venture brands through the launch of leading and wey, the medium and high-end brands. Although the sales volume of the two brands in 2019 is lower than expected due to the downward impact of the automobile market, it still reflects the ability and strength to directly compete with the joint venture brands.

"The market share of China's independent brands can still be stabilized to a certain extent, and it is likely to increase through competition." Xu Haidong said.