May 27, 2022

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Half the Automotive

China’s Car Sales Fell 6.8% in 2020, but That Still Likely Beats Other Markets

SHANGHAI—Chinese car sales declined 6.8% last year, as the world’s largest market for automobiles shrank for a third straight year.

Yet the single-digit drop counted as a success in the context of 2020, industry analysts said, with the coronavirus pandemic taking an even heavier toll on other markets. Global car sales are estimated to have fallen 15% last year, according to research firm

IHS Markit,

while U.S. sales are also expected to have dropped about 15%.

“In Q1 we projected much, much worse,” said

Lin Huaibin,

an auto analyst at IHS Markit, after sales in China slumped 41% in the March quarter, during which parts of the country were in lockdown.

Auto makers in China sold 19.29 million passenger vehicles last year, the China Passenger Car Association said Monday, down roughly a fifth on 2017, the market’s peak.

“This year will see a much stronger growth,” said

Cui Dongshu,

the association’s secretary-general. The group expects car sales in China to rise 7% in 2021.

The first major downturn to have hit China’s auto market is finally over, most analysts believe, with the market bouncing back in the latter half of 2020, including 6.6% year-on-year growth in December. Sales will grow 5% to 6% this year and return to 2017 volume levels—when 23.8 million passenger cars were sold—by around 2024, Mr. Lin forecast, barring any major new Covid outbreaks in the country or other economic shocks.

Last year’s second-half rebound proved stronger than anticipated because China brought the pandemic under control relatively quickly, enabling consumer confidence to return by midyear. City and provincial governments also stepped in to support the auto industry with incentives, while auto finance—which had dried up in many of China’s smaller cities following a crackdown on peer-to-peer lending platforms—started to become more widely available again.

Dealers said the outlook for 2021 looks positive. “I see good momentum,” said

Tang Mian,

a

SAIC Motor Corp.

dealer in the southwest city of Dali. “That gives me confidence in the new year.”

The three-year slump from which China’s auto market is emerging has changed the landscape of the country’s auto industry.

Premium auto makers have emerged as the big winners. In 2017, premium vehicles accounted for one in 10 of the cars sold in China; now one in six new cars are premium, according to IHS Markit.

That continuing shift enabled makers of high-end vehicles to sail through 2020 in China seemingly unaffected by the pandemic.

Mercedes-Benz

maker Daimler AG said its China sales increased 11.7% last year, even as its global sales declined 7.5%. Audi AG and

Bayerische Motoren Werke AG

, which have yet to report full-year sales, previously reported that their sales were up in China 4.4% and 6.4% in the first nine months of 2020 respectively.

Tesla Inc.

is also tapping into the demand for premium cars, having started selling locally produced vehicles here a year ago. The Palo Alto, Calif., electric vehicle maker sold more than 138,000 China-made Model 3 sedans last year in China, according to the passenger-car association.

Beijinger

Corbin Peng

said he bought a BMW in December after a 20% discount brought the car within his price range. “Car makers are making entry-level premium vehicles more and more affordable, so many of my peers prefer to spend a little bit more to buy a premium car,” said the 35-year-old microchip engineer.

Gone are the long waits at charging stations: Chinese electric-vehicle startup NIO is pioneering battery-swap systems, challenging Tesla and other rival car makers. Here’s how NIO and Tesla are racing for the world’s largest EV market in China. Photo illustration: Sharon Shi

The average transaction price for a premium car in China has declined to $62,000 from around $69,000 during the past four years, according to Mr. Lin. Premium auto makers including the German big three now produce more models in China than they used to, lowering the sticker price for local consumers relative to costly imports, while tax cuts have further reduced prices. That has put luxury cars within reach of millions of Chinese buyers, especially those in wealthier cities where incomes have continued to rise.

But their success left mass-market players to fight for a falling share of a shrinking pie, and some foreign car makers have been squeezed out. French auto maker

Renault SA

quit their main Chinese joint venture last year, after Japan’s

Suzuki Motor Corp.

did so in 2018, as tough market conditions left them unable to compete. Other auto makers whose sales have collapsed in China, notably the soon-to-merge

Fiat Chrysler Automobiles

NV and

Peugeot

maker PSA Group, face tough choices about whether to invest more in China or to cut their losses.

Some domestic companies have also come under severe pressure. Huachen Automotive Group, BMW’s joint-venture partner, was declared bankrupt by one of its creditors in November. BMW has said its China operations haven’t been affected.

General Motors Co. sold 2.9 million vehicles in China last year—its lowest tally since 2012. While full-year sales fell 6.2% compared with 2019, its sales rebounded in the December quarter, increasing 14.1% year-over-year.

Toyota Motor Corp.

sold 1.8 million vehicles in China, up 11% on 2019.

Honda Motor Co.

’s sales increased 5% to 1.6 million, while

Nissan Motor Co.

’s sales fell 6% to 1.47 million.

EV sales had suffered during the auto-market downturn, declining in 2019 for the first time. They began to recover in 2020, however, increasing 9.8% to 1.11 million, the passenger-car association said.

They should grow much more strongly this year, according to

Alexious Lee,

an auto analyst at Jefferies Group. A government target for EVs to account for a fifth of Chinese auto sales by 2025 is achievable, he said.

Meanwhile, tech companies are entering the market. Chinese search giant

Baidu Inc.

said Monday it is partnering with auto maker Zhejiang Geely Holding Group to produce electric cars.

Write to Trefor Moss at [email protected]

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