(Bloomberg) – A recovery in China’s car sales accelerated last month, signaling the world’s largest car market is coming from a two-year downturn as the economy improves and pandemic restrictions ease.
Retail sales of sedans, SUVs, minivans and universal vehicles increased by 7.9% in July from a year earlier to 1.63 million units, the China Passenger Car Association said on Tuesday. Sales development had improved monthly since March before a 6.5% decrease in June. Tesla Inc. and BYD Co. led the way for electric car sales last month.
The automotive industry is investing in the reopening of showrooms and department stores when the coronavirus pandemic eases in China will lead to a continued increase in demand. The eruption exacerbated a downturn caused by a slower economy, trade tensions with the United States and stricter environmental standards.
Still, challenges remain: the economy is still recovering and new technologies such as electrified motors may cause some buyers to postpone purchasing decisions until more models with such features have been released. China’s gross domestic product expanded 3.2% in the three months to June from the previous year, following a decrease of 6.8% in the first quarter.
The car wholesale level increased by 8.5% from July last year to 1.67 million units, China Association of Automobile Manufacturers said separately. This means an increase in inventories, which indicates that sales to consumers have not been as strong as sales from manufacturers to retailers.
Investors have been encouraged by the increase in sales. The share of China’s market leader Volkswagen AG has risen more than 40% from a low level in mid-March, while challenger General Motors Co. has increased by more than 60% during that interval. The local challenger Geely Automobile Holdings Ltd. has increased by almost 60% and peer Brilliance China Automotive Holdings Ltd., a partner of BMW AG, has added about 70%.
German and Japanese brands will benefit most from improving consumer growth, says Steve Man, an analyst at Bloomberg Intelligence in Hong Kong. GM and Ford Motor Co. could be affected by escalating tensions between China and the United States, he said.
Wholesale levels of new energy vehicles, consisting of clean electric cars, plug-in hybrids and fuel cell cars, advanced for the first time this year and increased 19% in July from a year earlier to 98,000 units, CAAM said.
Tesla Gigafactory in Shanghai.
Photographer: Qilai Shen / Bloomberg
Tesla, which began deliveries from its massive new Shanghai plant around the beginning of 2020, has quickly become the market leader in pure electric vehicles and has been a rare example of an EV manufacturer increasing monthly registrations this year. Tesla sold 11,014 cars last month in China and maintained its top spot in battery-powered cars, PCA said.
BYD ranked No. 1 in NEV’s total sales in July with about 14,000 units, PCA said. The company, with the support of Warren Buffett’s Berkshire Hathaway Inc., was helped by the sale of both pure electric cars and plug-in hybrids, which also use petrol.
Expensive electric vehicles face a harsh Coronavirus reality
After growing rapidly for several years, electric car sales lost momentum when the government moved to limit subsidies in mid-2019. The pandemic also hurt demand, while falling oil prices made gas bulbs more competitive. China still sees electric cars as a long-term priority and has added new incentives to help the industry recover.
Sales of NEVs will amount to 1.1 million units this year in the country, with Tesla accounting for approximately 100,000, CAAM forecast. It is compared with NEV wholesalers of 1.21 million units in 2019, according to data from CAAM.
(Updates with commentary from analysts in the seventh paragraph.)
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