Anlaysis from LMC shows that the slowdown in China’s light vehicle market continued in May, with year-on-year growth in sales of locally-made models dropping to just 1.4%.
In the first five months light vehicle sales were up 8.9% on the same period last year.
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However, LMC also said in a research note that its analysis of the SAAR suggests that these results should be interpreted as a “levelling off rather than as an ongoing deterioration”. Indeed, the light vehicle selling rate of 20.2m units in May points to a mild improvement from the 19.9m seen in April.
However, LMC also noted that dealer body CADA’s monthly survey indicates that the dealer-level destocking process came to an end in May, with the inventory index edging up to 1.70 months, from 1.67 months in April. LMC said that it expect OEMs in China to adopt a cautious approach when it comes to flooding the dealer network with excess units in a bid to fulfil their wholesales targets. In fact, a number of OEMs have switched from reporting their results in terms of wholesales to recording them in terms of retail sales, LMC says.
LMC notes that in 2014, light vehicle production exceeded sales by 270,000, or 1.4% of total production for the year, the highest level seen in the market since 2007 and well above the average of 0.6% seen between 2010-2013. It says the gap between production and wholesales increased by another 140,000 units during the first five months of this year, “which we believe will place a heavy burden on production schedules in the months ahead”.
LMC concludes that “most factors seem to point towards both consumer demand and vehicle retail sales heading into negative territory”. It adds that the restrictions on vehicle purchases which pulled sales forward in China’s largest cities have led to a flat sales trend in tier-1 cities so far this year for passenger vehicles. Moreover, sales in Tier-2 cities have seen only single-digit growth to date in 2015, “in contrast to the same period last year when they drove overall market growth”.
LMC maintains that the “current gloomy economic outlook has stifled any potential momentum in less developed areas of China” and now expects growth of just 8.6% in light passenger vehicles and just 5.7% in the light vehicle market as a whole in 2015.
