China car sales notch first rise in almost 2 years

Car sales in China, the world’s largest automotive market, rose for the first time in almost two years in April as pent-up demand unleashed by the lifting of coronavirus lockdowns gave the struggling sector a boost.

The increase of 4.4 per cent from the same month last year, according to the China Association of Automobile Manufacturers, marks the first rise since a rollback of tax breaks in July 2018 ended decades of uninterrupted growth.

The gain was driven largely by a 30 per cent rise in commercial vehicle sales, particularly trucks, while passenger vehicle sales were still 2.6 per cent below the year before, said CAAM.

CAAM said the rebound was not unexpected after the coronavirus pandemic sent China car sales tumbling 79 per cent in February and by 43 per cent in March. 

However, the country remained on course for a third consecutive annual decline in sales, CAAM said, giving an “optimistic” projection of a 15 per cent fall and a worst-case scenario of a 25 per cent contraction.

CAAM also highlighted the risk of disruption to imported auto parts supply chains, due to the global impact of the Covid-19 pandemic, that could result in production halts.

Yale Zhang, founder of Automotive Foresight, a Shanghai-based consultancy, said the April numbers were a “very good sign”, especially the rise in sales of sport utility vehicles, previously a growth driver for the industry.

Mr Zhang said he was watching for signs of continued demand next month to see if the rebound could be sustained. “If buyers want a car for protection on their daily commute, then we should see a bump in mid and lower-end car sales in May. That will be a good signal for the year.”

China’s leadership has responded to the crisis by extending tax breaks and subsidies to support the sector, and encouraging large cities to loosen restrictions on the number of licence plates available each year.

However, electric cars continued to lag behind. Sales of new energy vehicles — a category comprising battery powered electric vehicles and hybrids — fell 26.5 per cent in April compared with the same month in 2019, extending a downturn that began last July.

Nevertheless, global automakers have highlighted China as a bright spot in an otherwise abysmal market.

Volkswagen, the world’s largest carmaker, last week said that demand in the country — its most profitable market — was closing in on the same levels as this time last year.

Nissan hailed a 1.1 per cent increase in its sales in the country in April from a year earlier as evidence that “the overall pandemic in China has been brought under control”.

Global carmakers have fared better overall than their Chinese counterparts. Chinese brands’ share of the domestic market shrank by 9 per cent in April from a year earlier to 35 per cent, according to CAAM.

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