China light vehicle market set for 6% decline: IHS Markit

Washington – Chinese demand for light vehicles (LVs) is set to fall by 6% in 2019 compared to figures registered the year before, a recent report by IHS Markit has revealed.

LV sales fell nearly 10% year-on-year in June 2019 to 25.40 million units, marking the 12th consecutive month of decline, said the report published 16 July.

Although electric vehicle sales in China remain ‘a bright spot’, the numbers are not sufficient to off-set the general sales decline.

New registrations of EVs (defined as battery electric vehicles [BEVs] and plug-in hybrid electric vehicles [PHEVs]) in China rose at a monthly average of 85% during July 2018-March 2019 compared to year-earlier period.

“The continued strength of EV sales in China is likely largely the result of supportive government policies, including subsidies and a production mandate for new energy vehicles,” said Elena Pravettoni, senior economist, IHS Markit.

But EVs, she added, still remain a small fraction of the total Chinese market.

Factors contributing to general slowdown include a clamp down on loan availability, dealer destocking, and the transition to Euro 6 compliant vehicles.

Changes in the tax code covering vehicles with smaller engines are thought to have brought forward customer purchase decisions, which could also be part of the resulting market slowdown.

Even the proliferation of ride-hailing services is highlighted as having an effect on vehicle buying, to an estimated tune of 300,000 lost vehicle sales.

Carmakers had been using the Chinese market to shore up declining sales in other global regions.

Should the decline in China LV sales be more protracted, it will require a reassessment of related strategies, including the amount of direct investment in local China vehicle production, the report said.

“Recent sales trends point to a decoupling of car sales and economic growth in China. This is a fundamental shift, since the two have been strongly correlated up to this point,” explained Nigel Griffiths, chief automotive strategist at IHS Markit.

Image source: Geely