China Passenger Car Association: Passenger car retail sales in April decreased by 5.7% year-on-year, while new energy vehicle retail sales increased by 28.3% year-on-year

Affected by traditional off-season and strong consumer wait-and-see sentiment, the performance of the car market in April was sluggish, with national retail sales of passenger cars declining by 5.7% year-on-year. However, the implementation of the policy for trading in old cars for new ones brought significant benefits, and the China Passenger Car Association expects that retail sales in May will be better than in April.

On May 10th, the China Passenger Car Association released the analysis report for the passenger car market in April. In April, the national retail sales of passenger cars were 1.532 million units, a decrease of 5.7% year-on-year and 9.4% month-on-month. Cumulatively, retail sales have reached 6.364 million units since the beginning of the year, an increase of 8.0% year-on-year. The first quarter of the car market has basically achieved the expected strong start.

The China Passenger Car Association pointed out that factors such as unstable prices have led to a strong consumer wait-and-see sentiment, inhibiting the potential for sales growth:

Although there were 22 working days in April, two more days year-on-year, the strong consumer wait-and-see sentiment due to unstable prices led to a cyclical month-on-month decline in retail sales of passenger cars in April. The price war of new energy vehicles brought some incremental volume, but its sustainability is weak, and there is serious internal differentiation.

Under the continued price war, most conventional fuel vehicle models do not have room for continuous price reductions. Therefore, the market is being accelerated eroded by new energy vehicles, leading to some users adopting a wait-and-see attitude, further suppressing the potential for sales growth.

In addition, the China Passenger Car Association stated that due to the record high production and export volume of manufacturers in April, but weak retail sales, there is a trend of inventory accumulation with manufacturers producing 36,000 units more than wholesale, and domestic wholesale exceeding retail by 8,000 units. Manufacturers and channel inventory began to increase in March, and April is generally characterized by destocking. This year, due to stockpiling for the "May Day" holiday, inventory levels were slightly higher.

New energy vehicle retail sales in April increased by 28.3%, with a domestic retail penetration rate of 43.7%

Regarding new energy vehicles, the growth rate of production and sales of new energy passenger cars slowed down in April:

In April, the production of new energy passenger cars reached 802,000 units, an increase of 33.5% year-on-year and 0.9% month-on-month;

In April, the retail sales of new energy vehicles were 674,000 units, an increase of 28.3% year-on-year and a decrease of 5.7% month-on-month;

Exports reached 115,000 units, an increase of 26.8% year-on-year and a decrease of 4.1% month-on-month;

The China Passenger Car Association pointed out that in April, 14 manufacturers of new energy vehicles achieved monthly wholesale sales of over 10,000 units (unchanged from the previous month, an increase of 3 manufacturers year-on-year), accounting for 86.6% of the total new energy passenger car volume (86.5% last month, 80.7% in the same period last year), including BYD Auto with 312,048 units, Tesla China with 62,167 units, and Geely Auto with 51,428 units. In terms of exports in April, BYD Auto exported 41,011 units, and Tesla China exported 30,746 units On the export side, in April, the export of new energy passenger vehicles reached 115,000 units, a year-on-year increase of 26.8% but a month-on-month decrease of 4.1%. This accounted for 27.9% of passenger vehicle exports, a decrease of 2.9 percentage points from the same period last year. The China Association of Automobile Manufacturers stated:

With the emergence of China's scale advantage in new energy vehicles and the expanding market demand, an increasing number of Chinese-made new energy product brands are going global, with their recognition overseas continuing to rise. Although there have been some disturbances in Europe recently, the long-term outlook for new energy exports remains positive and promising.

From the retail data of overseas markets for independently branded exports monitored, A0-class electric vehicles account for nearly 50%, serving as the absolute main force in independent exports. Independent brands such as SAIC have performed well in Europe, while BYD has risen in markets such as Southeast Asia and South America. In addition to the impressive performance of traditional export car companies, emerging forces in exports have gradually increased, with data beginning to emerge in overseas markets.

Regarding penetration rates, the China Association of Automobile Manufacturers pointed out that in April, the domestic retail penetration rate of new energy vehicles was 43.7%, an increase of 11.7 percentage points from the 32% penetration rate of the same period last year. In April, the penetration rate of new energy vehicles among independent brands was 66.8%; among luxury cars, it was 22.6%; while among mainstream joint venture brands, it was only 7.5%.

Looking at the performance of various car companies, the China Association of Automobile Manufacturers stated:

In April, the overall trend of new energy passenger vehicle companies was strong, with BYD solidifying its leading position in independently branded new energy vehicles with pure electric and plug-in hybrid dual-drive systems; the market performance of extended-range electric vehicles represented by Tesla, Li Auto, Changan Automobile, and Leapmotor was particularly strong.

In the wholesale structure of new energy vehicles for the full year of 2023: pure electric vehicles account for 69%, plug-in hybrids for 23%, and extended-range electric vehicles for 8%, with extended-range vehicles effectively addressing range anxiety for pure electric vehicles, belonging to a new branch of pure electric vehicles.

The automotive market is expected to achieve recovery growth in May

Looking ahead to the automotive market in May, the China Association of Automobile Manufacturers stated:

In May of this year, there are a total of 21 working days, the same as last year, but this year, a continuous 5-day holiday has compressed the production and sales time interval in May. As the summer off-season approaches, the automotive market is entering a stable period. In April, the Purchasing Managers' Index (PMI) for China's manufacturing industry, the Business Activity Index for the non-manufacturing sector, and the comprehensive PMI output index were 50.4%, 51.2%, and 51.7% respectively, all remaining in the expansion range, which has a significant role in promoting the stability of the automotive market.

With the implementation of the national "scrappage for new" policy, the introduction and follow-up of corresponding policies in various regions, coupled with a phase of cooling in the new car price war, the market's wait-and-see group's consumption enthusiasm has been stimulated, and the market should enter a relatively good development stage.

The China Association of Automobile Manufacturers also mentioned that this year's self-driving holiday travel has become more popular, with an increase in personalized, low-cost travel options such as private car self-driving and rental car self-driving. Assisted driving brings more driving pleasure, the independent space experience of intelligent cabins is enjoyed, and the on-site verification of the improvement of charging network infrastructure in the form of staggered long holidays all contribute to the increase in consumer enthusiasm for new energy vehicles Eliminating the transformation concerns of conventional fuel vehicle consumers.

The implementation of the old-for-new policy is a major positive development

The China Association of Automobile Manufacturers (CAAM) pointed out that the implementation of the old-for-new policy is a major positive development for the automotive market. Despite the long May holiday, it is expected that retail sales in May will be better than in April.

In a statement, CAAM mentioned,

Since the Spring Festival, consumers have been paying attention to the old-for-new policy, expecting the policy to bring affordable car purchases. Therefore, the implementation of the policy is a major positive development for the automotive market. It is expected that the total annual scrappage volume will reach nearly tens of millions of vehicles. The subsidies for old-for-new cars will bring a million-level increase in private new car consumption to the automotive market, as well as an annual consumption increase of over one hundred billion yuan. It is expected that the automotive market in May will sweep away the sluggish state and achieve a recovery growth.

It is also expected that the fiscal effects of the subsidy policy will be significant. Preliminary estimates indicate that for every 1 yuan of subsidy investment, the output value that can be driven is at a ratio of 1:15. Furthermore, for every 1 yuan of fiscal subsidy, the tax revenue driven by private scrappage renewal is at a ratio of 1:3.

In addition, the continued sluggishness in consumption of conventional fuel vehicles is an important factor inhibiting a comprehensive recovery of the automotive market. CAAM believes that the old-for-new and scrappage renewal policies this time reasonably ensure the replacement demand of the conventional fuel vehicle consumer group, which is beneficial for the gradual strengthening of the automotive market in the coming months.

China accounted for 62% of the world's new energy vehicle market share and had a 4.6% industry profit margin in January-March

CAAM stated that the growth trend of the world's new energy vehicles in January-March has slowed down compared to previous years, with the growth rate of China's new energy passenger vehicles stronger than the world's average growth rate.

In March 2024, the global sales of new energy passenger vehicles reached 1.28 million units, a year-on-year increase of 17% and a month-on-month increase of 60%. From January to March, the global sales of new energy passenger vehicles reached 3.11 million units, a year-on-year increase of 21%. Due to the slowdown in the new energy trends in Europe and America, the growth trend of global new energy vehicles in January-March has slowed down compared to previous years.

In the first quarter of this year, Europe's sales of new energy passenger vehicles reached 650,000 units, with a growth rate of 4%, while North America's sales of new energy passenger vehicles reached 350,000 units, with a growth rate of 8%. The sales growth of new energy vehicles in Europe and America has slowed down. Currently, early adopters and environmentalists have already purchased electric vehicles. Mainstream consumers still have significant concerns about charging infrastructure, battery life, and insurance costs. Even with the relaxation of the use of autonomous driving under relatively high interest rates, the penetration rate of sales has not reached expectations, and the penetration characteristics of the S-curve are not yet evident.

Recently, the growth rate of China's new energy passenger vehicles has been stronger than the world's average growth rate. In 2023, China accounted for 64% of the world's market share, and in January-March 2024, the share was 62.5%, showing strong performance.

CAAM also pointed out that the proportion of hybrid vehicles in the first quarter is increasing:

In the first quarter of 2024, the preliminary statistics for automobile sales reached 21.05 million units, with new energy vehicles reaching 3.24 million units. Pure electric vehicles accounted for 10.2% of the world's automobile market, plug-in hybrids accounted for 5.2%, and hybrid vehicles accounted for 6.4%, with the proportion of hybrid vehicles increasing In terms of profit margin, the overall profit of the automotive industry has slightly improved, but the survival pressure on some enterprises is increasing:

In the first quarter of 2024, the revenue of the automotive industry was 2.2483 trillion yuan, a year-on-year increase of 6%; costs were 1.9642 trillion yuan, a year-on-year increase of 6%; profits were 104 billion yuan, a year-on-year increase of 32%; the profit margin of the automotive industry was 4.6%, still lower than the average profit margin of 4.9% for the entire industrial sector. With the expansion of the automotive market production scale, the decline in PPI, and the decrease in upstream lithium carbonate costs, the overall profit of automotive enterprises has slightly improved.

In the first quarter of 2024, the production and sales of the automotive industry on a low base were relatively good, but faced intense competition. Profits mainly rely on exports and high-end luxury segments. Most other enterprises experienced a sharp decline in profits, and the survival pressure on some enterprises is increasing. Due to the profitability of traditional fuel vehicles, the market is shrinking rapidly; although new energy vehicles are growing rapidly, they are experiencing significant losses, highlighting contradictory pressures