In April China’s vehicle sales increased by 4.4% year-on-year to 2.07 million units, marking the market’s first increase in sales for almost two years. While this is a cause for some muted celebration it does provide a problem for assessing market prospects for other markets around the world.
As the epicentre of the COVID-19 outbreak, China’s been held up as the market after which many of the other world’s markets could be patterned to try and get a read on likely market developments for the rest of the year. Essentially what happened in China presages what would happen in other markets with a time lag – broadly of two months – dependent on the virus’s spread.
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Up to a point this has largely held true. China’s sales plunged 79% in February as the virus took hold and the sales declines eased off in March to 43% as the virus was suppressed and lockdowns were dialled back. Developments in other markets have mirrored these developments.
The big question now is whether the rest of the world can expect to see positive year-on-year gains by as soon as June if China’s experience is the pattern to follow? If it can, it means that forecasts for the year will again need to be ripped up and started again.
Much will depend on how quickly economies reopen and the extent of economic scars left after lockdown. Will consumers feel confident enough to purchase big ticket items? Will consumer confidence be that important if the need to own a vehicle for individual safety takes precedence? Will purchasing incentives be at a once-in-a-lifetime level?
It will also depend on individual market characteristics and where the market is on the motorisation curve. In India and China, for example, market surveys seem to indicate that consumers will bring forward planned vehicle purchases to mitigate public health risks. In the west, vehicle ownership is already much higher so it will be less of a driver. More interesting in the west will be generational issues. Millennials have widely been assumed to be less interested in vehicle ownership, but initial surveys of the populace suggest that this might not hold true in the wake of the pandemic.
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By GlobalDataAlso to consider are the market conditions in China that precipitated the 4% increase in sales. It could be that state-led regional sponsorship of vehicle sales boosted market demand levels; the market in China has historically been delineated by regional champions based on the JVs present in each region, e.g. in the Shanghai area GM and VW are regional champions and tend to dominate fleets there. Or, as has been posited, many Chinese are visiting dealerships to purchase second cars to protect their families against the public health risk. If true, this would tend to skew the market towards smaller cars.
As with many things related to this pandemic the full picture will only emerge when full sight of the data becomes available. Whatever unfolds, China’s April sales certainly mark an interesting phase in this pandemic’s impact on the automotive sector.
See also: China vehicle market returns to growth in April
