CPCA: Review of passenger China’s car market in August and outlook for September

China Passenger Car Association (CPCA) released its analyst on China's car market lately, passenger cars sales volume in August went downward, but sales volume won’t be too low in September.

Review of passenger car market in August

This year, the downward pressure from real economies and the constraint on consumption by stock market together quickened the downward trend of the growth in car market. In May to August, retail sales growth in domestic car market seemed to have reached bottom and go stabilized. In recent months, retail sales growth in domestic passenger car market went from 5% in May and -1% in June and July back to 2% in August.

August is the peak season of car purchase before school starts, and thus usually retail sales growth in August is favorable month on month. This August, though the sales of SUVs of grade AO strengthened, the growth in car market was only a natural increase as the sales of new cars going into the market in recent months was unfavorable. And growth of passenger cars export in August is a negative one on economic volatility and blasts in Tianjin.

Under such circumstances, many carmakers started to promote retail sales and lower inventory levels. As the retail sales volume is 40,000 units higher than wholesale volume and wholesale volume is 80,000 units higher than production, inventory decreased. And through promotion and re-positioning, carmakers weathered the difficult period of negative sales growth. In August, daily retail sales increased by 14% month on month, and for independent brands, the growth reached 12%.

Since June, producers have been cutting production due to sluggish demand. While the blasts at Tianjin Port on August 12 caused producers’ loss of 30,000 units, which also slashed inventory.

Market outlook in September

The best time to purchase a car is around the corner as domestic oil prices are low, highway toll fee is free during National Day holiday and recent promotions have brought down the prices, which are all propelling the recovery in car market.

This July and August, producers’ stock decreased by 30,000 units, while distributors’ stock reduced by 110,000 units, leading to a relatively balanced market fundamental. In the meantime, tax payment decreased by 10.5 billion yuan in January to July in 2015. Supply in September will be a bit tight as effective production days may be squeezed on holiday during this 21-day September. As for demand, with the recovery of demand in end Q3, effectiveness of promotion and distributors’ need to stock up in end September, sales volume won’t be too low in September.

Three anticipated policies that are favorable to the car market are subsidy catalog for energy cars, financial support and adjustment of exchange rate. However, compared with housing market, these policies are still not too much. Considering fewer taxes were levied from car market, the whole industrial chain may be affected.