Fitch Ratings: Chinese SUV market holds great potential

Fitch Ratings says in its latest report that Sport Utility Vehicles (SUV) will remain the key growth driver for China’s passenger vehicle market, while small-sized and low-emission SUVs in particular may expand their market share further, thanks to strong lower-end consumer demands and the vehicle purchase tax cut effective from October 2015. However, SUV margins may be under pressure due to intensifying competition and rich margin may start to weaken for automakers with heavy SUV business.

Fitch expects the SUV segment will further grow at a robust double-digit rate in the year of 2016 and continue to outperform China’s passenger vehicle market. Chinese consumers have shown increasing interests in SUVs, and auto manufacturers, both home and abroad, have been launching SUV models intensively. However, the growth rate may start to slow down after the supply-driven “SUV fever” in 2013 to 2015.

According to CAAM, China Association of Automobile Manufactures, China’s SUV sales volume grew by 48% for the first 10 months of 2015, compared against last year, while the overall passenger vehicle market growth slowed to 3.8% from 9.9% in 2014. Fitch believes China’s SUV segment still holds great potential, considered its relatively low SUV penetration compared with other large and geographically diverse countries such as US, Canada and Russia. SUVs accounted for around 21% of China passenger vehicles sales volume in 2014 and 29% as of the first 10 months of 2015, while over 30% in the US.