State of China’s Auto Market - February 2023 - Automobility
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26 Feb State of China’s Auto Market – February 2023

Posted at 16:24h in Newsletter by

China Auto Market heads into the new year with a down month

 

Weak January sales were anticipated due to several factors

Comments from Bill Russo, Founder & CEO of Automobility Ltd.

January Vehicle sales in China were down ~35%, owing to several factors. The Lunar New Year holidays fell ten days earlier than last year, effectively reducing the number of selling days this January. On top of this, the expiration of tax subsidies for gasoline powered vehicles plus the elimination of NEV purchase subsidies were a contributing factor for weakening demand.

Looking closely at the comparisons across segments, we see that the overarching trends observed in recent years are still present:specifically, that consumer preference is rapidly shifting to new energy vehicles (NEVs).  NEV sales were down 6.3% while ICE sales were down 40.8%.

January’s 408,000 NEV were the lowest recorded since the Shanghai lockdown period from last April. However, this pullback is rather moderate in comparison with ICE vehicle sales given the reduced selling period. The market remains extremely concentrated, with BYD commanding ~38% share of NEV sales in January.

As a consequence of this shift in demand, foreign brands have ceded their historical dominance of the China auto market. For the first time since the establishment of Sino—Foreign automotive joint ventures in the 1980s, locally branded cars outsold foreign brands in the 4th quarter of 2022.  This shift is also evident in the January results, where declines were more severe for foreign brands. While local PV sales were down 32.1% compared to last year, all foreign brands suffered much heavier declines. We expect 2023 to be the first full calendar year, in which local brands outperform global brands in terms of PV sales volume.

The used car segment declined 9% in 2022, indicating consumers are holding on to their cars longer – a sign of overall economic weakness.

However, January sales of used vehicles were down a modest 15.9% (versus the 30% overall PV new car sales decline), perhaps giving an early indication of a recovery for used vehicle sales in 2023.

January NEV Leaderboard

BYD remains the dominant player on the NEV sales leaderboard, with its 38% share of sales.  However, it should be noted that several brands are experiencing strong growth in spite of a shorter selling period in 2023. Most notable is Chang’an with a 106% increase, and Li Auto up 23.4%, mainly from the strength of its new L9 entrant.

After much fanfare over its aggressive pricing moves, Tesla sales of locally produced vehicles increased moderately from last January period, but remain far behind the market leader BYD.

Several questions to consider:

–  Will a market recovery happen on the PV side in 2023?

–  While China’s economy recovers from the impact of zero-COVID, is a recovery in the auto market even possible given the stimulus-led pull-ahead of demand into 2022?

– With foreign brands now selling fewer than half of cars in China, who will be the next to exit the market?

–  Other than BYD, who will be the likely winners in the NEV game, and can companies position themselves to work with the winners?

In his role as AmCham Shanghai’s Automotive Committee chairman, Bill Russo will host the State of China Auto Market webinar on Tuesday, February 21.

If you wish to join the next monthly AmCham Automotive Committee webinar on the State of China’s Auto Industry, you can register here:

Webinar | State of China Auto Market Monthly Briefing (Feb)​

February 21, 2022 Tuesday

9:00 AM – 9:45 AM (GMT+8)

 

About Bill Russo

Bill Russo is the Founder and CEO of Automobility Limited, and is currently serving as the Chairman of the Automotive Committee at the American Chamber of Commerce in Shanghai. His 40 years of experience includes 15 years as an automotive executive with Chrysler, including 19 years of experience in China and Asia. He has also worked nearly 12 years in the electronics and information technology industries with IBM and Harman. He has worked as an advisor and consultant for numerous multinational and local Chinese firms in the formulation and implementation of their global market and product strategies.

About Automobility

Automobility Limited is global Strategy & Investment Advisory firm based in Shanghai that is focused on helping its clients to Build and Profit from the Future of Mobility.  We help our clients address and solve their toughest business and management issues that arise in midst of fast changing, complicated and ambiguous operating environment.  We commit to helping our clients to not only “design” the solutions but also raise or deploy capital and we can assist in implementation, often together with our clients.  We put our clients’ interest first and foremost.  We are objective and don’t view our client engagements as “projects”; rather as long-term relationships.

Our partners are former senior executives at large corporations and/or senior consultants at leading management consulting firms. We believe clients would benefit the most from a combination of consultants with substantive experience in consulting and in line management.

Therefore, we organize ourselves into a core team augmented by an extensive “extended team members” with a large variety of skills and expertise.

Contact us by email at [email protected]

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