Higher tariffs on US exports to China could encourage manufacturers such as BMW to boost localisation strategies in the worlds largest vehicle market

Higher tariffs on US exports to China could encourage manufacturers such as BMW to boost localisation strategies in the world's largest vehicle market

New vehicle sales in China rose by 4.8% to around 2.27 million units in June from 2.17 million units a year earlier, according to data released by the China Association of Automobile Manufacturers (CAAM).

This follows an almost 10% year-on-year rise in May and points to strong domestic sentiment in the country despite the escalating trade war with the USA. China cut tariffs on all imported vehicles in May from 25% to 15%, which may also have helped lift the overall market last month.

China hiked tariffs on US vehicle imports on 1st July, however, from 15% to 40%, in retaliation to similar tariff hikes by the USA and this could have a slightly negative effect on the Chinese market in the second half of the year.

As well as US automakers, Mercedes-Benz and BMW also export significant volumes of vehicles from the USA to China each year. These latest tariff hikes, if sustained,will inevitably accelerate the localisation of some of these export models in China.

The market last month was driven by strong demand for commercial vehicles, which are understood to have increased by around 20% to 0.4 million units.

Overall passenger vehicle sales increased by just 2.3% to around 1.87 million units in June, with demand for sedan/saloon cars rising by 9.1% to 963,000 units, while SUV sales declined by  0.5% to 738,000 units.

Sales of new energy vehicles, mainly electric and plug-in hybrid vehicles, rose 42.9% to 84,000 in June and by over 111% to around 412,000 units in the first half of the year.

Total vehicle sales in the first half of 2018 expanded by 5.6%to around 14.1 million units compared with 13.3 million units a year earlier, keeping the market on course to exceed 30 million units this year.

General Motors no longer reports monthly sales, but second-quarter sales rose 0.7% year-on-year to 858,344 units and by 4.4% to 1.844 million units in the first half of the year.

Ford Motor's sales fell by 38% to 62,057 units last month and by 25% to 400,443 units year-to-date.

Nissan's equivalent sales rose by 10.4% to 131,038 units and by 10.8% to 720,447 units respectively, while Toyota's sales were up 11% at 117,800 and 10.9% at 680,000 units.

Honda reported a 6% sales drop to 107,985 units in June, with year-to-date sales down by 6.4% at 609,100 units.