China’s auto market full-year production and sales in 2023 hit record highs. Total Light Vehicle (LV) sales reached 29.7 million units (+11%) in 2023, exceeding the previous all-time high of 28.6 million units in 2017.
In December, LV wholesales were 3.1 million units, a year-on-year (YoY) increase of 23%. At the vehicle type level, Passenger Vehicle (PV) sales (i.e. wholesales including exports) for December increased by 24% YoY to 2.8 million units. At the same time, commercial vehicles also achieved growth of 14%, with 293k units purchased in December. In terms of the month-on-month (MoM) growth rate, PV increased by 7.8%, but CV fell by 3.2% in December. Despite the overall depressed economic environment, the Chinese LV market performed exceptionally well in 2023, maintaining strong momentum from when it began to pick up in the second quarter of the year, with the selling rate reaching 31.5 million vehicles per year in December. This was the seventh consecutive month that the rate topped the 30 million-unit mark.
In terms of production, a total of 3 million LVs were produced in December, a YoY increase of 30%. At a vehicle type level, PV production (accounting for 90% of total LV production) in December was 2.7 million units, a YoY increase of 28%. The production of PVs for 2023 is expected to have been 25.9 million units, a YoY increase of 10%. CV production in December was 318k units, a rapid increase of 44% YoY. For 2023 as a whole LV production reached 29.1 million units, a YoY increase of 11%.
December is traditionally the peak sales season in China and combined with the momentum of major car companies at the end of the year, this enabled overall production to maintain strong growth. Throughout 2023, China’s automobile market production and sales hit record highs, achieving double-digit growth. New energy vehicle (NEV) domestic demand and exports had a significant boosting effect on the overall market and became the main growth points in the Chinese automobile market in 2023.
In December, Chinese PV exports reached 407k units, with a year-on-year growth rate of 57%. From January to December 2023, China’s PV exports were 4.01 million units, with an export growth rate of 64% versus 2022. Compared with the gradual recovery of domestic sales, the performance of the export market was very strong. The main driving force last year was an improvement in the competitiveness of Chinese products and the breakthrough in the European and (to a lesser extent) American markets, as well as the comprehensive replacement of international brands in the Russian market by Chinese vehicles due to the Russia-Ukraine crisis. The huge increase in exports brought about by the improvement of China’s NEVs was particularly noteworthy.
Not only exports but also domestic sales are performing well despite a slowdown in the domestic economy, record youth unemployment and low consumer confidence. Domestic passenger car sales (i.e., not wholesales) grew by 4.5% through 2023, especially in the second half of 2023, when the growth rate continued to accelerate. Competition among car companies is intensifying, new models (especially NEVs) are constantly being launched, and the price war among domestic and foreign brands is in full swing. These factors have stimulated consumers’ purchasing intentions. Moreover, the government’s continuation of the personal purchase tax exemption policy for NEVs also supported the growth of that vehicle type. Chinese brands expanded their market share of total PV sales in 2023 to 54%, benefitting from strong NEV products. After two consecutive years of deep decline, domestic commercial vehicle sales grew by 16.6% in 2023. Sales of commercial vehicles in 2023 were supported by the post-pandemic economic recovery. Thanks to the strong demand for new energy light trucks, sales of light trucks led the growth of the entire market. Since 2022, more and more cities have lifted restrictions on pickup trucks (that is, allowing pickup trucks to enter the city), which has also boosted pickup truck sales.
In China, with the recent intensive introduction of a series of macro-control policies and measures, enterprises’ confidence in market development has been further enhanced, production demand has recovered synchronously, and major car companies are also regularly launching new products, further helping to release market demand. And so, we believe that in the next few years, China’s automobile industry will achieve steady growth but increasingly driven by the rise in exports and NEVs.
China’s sales volume reporting has long been based on wholesale numbers as the data source, which includes exports, and our production forecast is driven by sales volume. However, due to the strong surge in China’s vehicle exports in recent years, it is becoming necessary to show the constituent elements of the wholesale figures individually in order to better track domestic demand in China. In future sales-based forecasts and reports, we plan to separate the export numbers from the wholesale numbers and show domestic demand history and forecast. Future production forecasts will be driven by domestic sales forecasts and forecasts of imported Chinese cars by the destination country. This process may bring about some fluctuations in forecasts. But the overall trend in our near-term forecasts has remained unchanged.
