The Chinese are buying cars again - slowly!
A Volkswagen driver at a coronavirus checkpoint in Beijing in spring 2020 (Photo: Asiawaypoint).
By Henrik Bork
April 15, 2020
How fast can the Chinese automobile industry recover from the coronavirus shock?
A slow recovery is underway
This is a billion dollar question, and, to say this upfront, accurate predictions are very difficult at the moment. Currently, mid-April 2020, the picture is very mixed.
After talking to industry insiders, Chinese and foreign market observers in Beijing, Shanghai and Hong Kong, and tuning into industry association’s press conferences (online of course, everybody is live streaming in China these days), I co-authored an article with Sven Prawitz for “China Market Insider”, a new format with expert analysis about several important Chinese industries, published by “Automobil Industrie”. (Link below, in German).
… but Chinese consumers remain cautious
My take: There is a slow recovery underway, and this is of course of tremendous importance for the world economy. There is cause for optimism.
At the same time, consumer demand for passenger cars in China is still extremely sluggish.
The inventory of major OEMs is currently piling up in warehouses and harbors, and they are even slashing prices for their employees in China to clear out some of them.
The CEOs of car manufacturers in China are publishing optimistic comments about fast recoveries, but even Chinese government officials are cautioning against too high expectations.
The Chinese central government and some provincial and local governments are taking measures to spur demand. So far, the signals are more or less chaotic, however, and mainly for electric vehicles (NEV), not for cars with combustion engines.
Waiting for tax incentives
Consumers, emerging from months of lockdown allover China, are holding back with big purchases like cars for a variety of reasons. Many have had to endure salary cuts and feel insecure about the recovery of the Chinese economy. Other consumers speculate that the Chinese government will publish further tax cuts for passenger cars - both for e-vehicles and traditional cars - and are holding off witth their purchases until that happens.
On the supply side, there are also question marks abound. One example: Supply chains continue to be impacted, especially with production in Europe and the US now put on hold. While most parts are manufactured in China, there are always some that need to be imported. This is a big problem.
It also true that most factories and also most dealerships have reopened, and sales are now picking up again (see the figures quoted in my article). Life goes on for OEMs in China - at a time where this statement is about the only light at the end of the tunnel for the global automobile industry that is suffering from the coronavirus crisis.
If you can read German, please read the article co-authored with Sven Prawitz for “China Market Insider” of “Automobil Industrie”:
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