Auto sales growth beckons on govt support measures

Financial stimulus, favorable policies, bigger charging network underscored by experts

The growth of China's auto market has slowed, but is expected to regain momentum after a slew of favorable policies and financial stimulus measures has recently been unveiled by authorities, said experts and analysts.

The National Development and Reform Commission, China's top economic regulator, released the measures in late July to boost vehicle consumption.

The measures covered such aspects as increasing the quota of license plates in big cities, facilitating secondhand vehicle transactions, building more charging infrastructure and improving the availability of auto loans.

Some local authorities have acted more proactively. In Haikou, capital of South China's Hainan province, those who purchase a new energy vehicle from July 1 to Sept 30 this year are eligible for a coupon of up to 6,000 yuan ($834).

Local Haikou officials said the coupons, representing a combined value of 50 million yuan, are valid at local shopping plazas and supermarkets until the end of the year.

In Central China's Henan province, car buyers in 2023 are entitled to receive a subsidy of 5 percent of the price of their new vehicles.

The government in Changsha, capital of Central China's Hunan province, has earmarked 10 million yuan for vehicle buyers.

Those who complete purchases in the city between July 17 and Sept 30 will receive an e-coupon of up to 6,000 yuan per vehicle.

Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, said the measures will help unleash the growth potential of the vehicle market in China, the largest in the world since 2009.

Chen expects total deliveries are expected to grow further compared with 2022. Statistics from the CAAM show that 15.62 million vehicles were sold in the first seven months, up 7.9 percent from the same period last year.

Paul Gong, head of China Auto at UBS, is also optimistic about the vehicle market.

He said the decrease in passenger vehicle sales in July was primarily due to the high comparative base and, despite the dip, sales were the second-highest in the month over the past decade, suggesting "strong momentum".

Statistics from the China Passenger Car Association show that wholesale sales in July were 2.07 million units, down 3 percent year-on-year and 8 percent month-on-month. Retail sales reached 1.78 million units in July, down 2 percent year-on-year and 6 percent month-on-month.

Joel Ying, an analyst at China Auto &Parts at Nomura, agreed that the favorable policies would be a boost.

"Considering the role of the automotive industry in China's economy, especially the NEV sector, the recent announcement of favorable policies for vehicle consumption is in accordance with market expectations, and the vehicle market will get a boost in the short term," Ying said.

He said the gradual end to the price wars that started earlier this year, which swept across the market, is helping to restore customers' confidence as well.

Ying said that he is conservative about total vehicle sales in China this year however, citing such factors as the high comparative base last year, as well as global economic uncertainties.

He said more efforts are needed to improve the charging network to ensure the steady growth of the country's NEV sector. "For the sector, mileage anxiety remains the biggest obstacle," Ying said.

More than 1.44 million charging piles were added from January to June, up 40.6 percent from the same period in 2022, according to the China Electric Vehicle Charging Infrastructure Promotion Alliance.

By the end of July, there were 6.93 million charging piles in the country, according to the alliance. These accounted for 40.8 percent of NEVs on Chinese roads, said the China Association of Automobile Manufacturers.

Chen at the CAAM expects demand for NEVs, boosted by favorable policies, will continue its high-speed growth.

Total NEV sales are expected to reach 9 million units this year, up from 6.89 million in 2022, he said. From January to July, sales totaled 4.53 million units, up 41.7 percent year-on-year, accounting for 29 percent of total vehicle sales in the same period.