Features
15 sep 18

China car sales performance goes South

GM-SAIC and GM-SAIC-Wuling, building respectively the Cadillac, Buick, Chevrolet brands and the Baojun and Wuling minibus vehicles announced again a drop in sales performance in August, compared to the 2017 sales results (resp. -3.8% and -5.8%).

Similar decreased performance was noted for Ford, down 26% for the period January to July in comparison with 2017. The overall market for 2018 is forecasted to grow (3%), but much slower than in previous years (e.g. 13.7% in 2016).

Trade war?

The trade conflict between China and the US is often mentioned as the primary reason for the drop in sales, but as often is the case in China, consumer behaviour has impacted sales much more than the trade war.

Mainly Tesla, BMW and Mercedes have had to increase the price points of the models produced in the US, such as the popular BMW X models.

Consequently, the 2 German OEMs have decided to move the production of their China units to other countries and avoid the import taxes. Tesla has made the strategic choice to start production in China and has submitted for a Shanghai based giga-factory to Chinese Government.

Consumer behaviour

The main reason for the sales drop however is the changing behaviour of the Chinese consumer. The vehicles that are being displayed in showrooms today have been developed and designed 5 to 7 years ago, when large engine (V6 and V8) 4-door sedans were popular. Today however, the car customer has a preference for SUVs and is starting to pay attention to fuel efficiency.

It took especially the American and Japanese manufacturers (Ford, GM and Toyota), too long to realise this. The European brands however have started to develop compact SUVs much earlier and are less impacted.

Plates

Another factor impacting sales figures, is the availability of license plates in Tier 1 cities. Chinese Government is fully aware of the pressure generated by traffic on its mega-cities. In all of these locations, auctions and lotteries have been implemented to reduce the number of additional vehicles. As a consequence of the state-regulated vehicle registration limitations, it becomes more difficult and more expensive to buy a car.

Economy

Finally, Chinese economy is in a transition phase. The Government aims to upgrade the Chinese economy into much a high-tech industry, capable of competing with the US. “Made in China 2025”, the strategy launched by Prime Minster Li, prepares the country for the future, but the transition from an old-school manufacturing country into a new tech-driven environment takes time and requires a behavioural change.

Authored by: Yves Helven