China Passenger Car Association: New energy vehicle retail sales in May increased by 38.5% year-on-year, the car market's new products enter a "price war" stage with a temporary cooling down

With the release of the detailed implementation rules at the end of April, the price war of new cars in the automotive market has temporarily cooled down. The accumulated purchasing power is expected to be unleashed in May, and the China Passenger Car Association predicts that the enthusiasm for car purchases in June is likely to continue, achieving a good month-on-month growth.

On June 11th, the China Passenger Car Association released the analysis report for the passenger car market in May. In May, the national retail sales of passenger cars reached 1.71 million units, a year-on-year decrease of 1.9% but a month-on-month increase of 11.4%. The cumulative retail sales this year reached 8.073 million units, a year-on-year increase of 5.7%.

In May, the retail sales of new energy vehicles reached 804,000 units, a year-on-year increase of 38.5% and a month-on-month increase of 18.7%. The export volume of new energy vehicles in May was 94,000 units, a year-on-year decrease of 4.0% and a month-on-month decrease of 18.8%. The domestic retail penetration rate of new energy vehicles in May was 47.0%, an increase of 14 percentage points compared to the same period last year when it was 33%.

The China Passenger Car Association pointed out:

In May, the national economy operated steadily. Despite factors such as holiday mismatches and a high base in the same period last year, with the implementation of the national policy of "scrapping old for new," the enthusiasm for consumption was boosted by the Beijing Auto Show, corresponding policy measures introduced and followed by various regions, as well as the temporary cooling of the price war of new cars in the market, and the repurchase policy further dispelled user concerns.

The release of heavyweight products by leading companies drove stable expectations for product supply. The consumption enthusiasm of the previous market-watching group was stimulated, and the national new energy passenger car market entered a relatively good development stage in May.

Furthermore, the China Passenger Car Association stated that exports continued the strong growth trend from the end of last year, with a 30% year-on-year increase in exports to 569,000 units in May. Manufacturers adjusted their inventory steadily. Due to relatively cautious production by manufacturers in May, but with retail picking up, there was a destocking trend where manufacturer output was 30,000 units lower than wholesale.

In May, the year-on-year increase in retail sales of new energy vehicles was 38.5%, with a domestic retail penetration rate of 47.0%.

Regarding new energy vehicles, in May, the production and sales of new energy passenger cars increased, while exports declined slightly:

In May, the production of new energy passenger cars reached 881,000 units, a year-on-year increase of 31.0% and a month-on-month increase of 9.9%.

In May, the retail sales of new energy vehicles reached 804,000 units, a year-on-year increase of 38.5% and a month-on-month increase of 18.7%.

In May, the export volume of new energy vehicles was 94,000 units, a year-on-year decrease of 4.0% and a month-on-month decrease of 18.8%.

In May, the domestic retail penetration rate of new energy vehicles was 47.0%, an increase of 14 percentage points compared to the same period last year when it was 33%.

From the monthly domestic retail market share perspective, in May, the retail market share of mainstream domestic new energy vehicle brands was 71%, a year-on-year decrease of 2.1 percentage points;

The market share of joint venture new energy vehicle brands was 4.5%, a year-on-year decrease of 0.1 percentage points;

The market share of new forces was 16.3%, with brands like Xiaomi Motors driving the year-on-year growth of new forces by 3.5 percentage points; Tesla's market share was 6.4%, a year-on-year decrease of 0.5 percentage points.

Regarding exports, the China Association of Automobile Manufacturers (CAAM) stated that despite recent disruptions from external countries, the long-term outlook for the new energy vehicle export market remains positive:

Monitoring the retail data of overseas markets for exports of domestic brands, A0-class electric vehicles account for nearly 50%, serving as the absolute main force for exports of domestic brands. SAIC and other domestic brands performed well in Europe earlier, while BYD rose in markets such as Southeast Asia and South America.

In addition to the impressive performance of traditional export car companies, new forces have gradually increased their exports recently, with data beginning to show in overseas markets.

Furthermore, according to a report by CAAM, global automobile sales reached 28.36 million units in the period from January to April 2024, with global new energy vehicle sales reaching 4.49 million units. The penetration rate of global new energy vehicles in the January-April 2024 period reached 15.8%, with the penetration rate of pure electric vehicles reaching 10.4% and plug-in hybrids reaching 5.4%.

Profit Margin of Automobiles in January-April: 4.6%; Cooling Down in May Due to "Price Wars"

CAAM stated that the profit margin of the automobile industry in January-April remained at 4.6%, with increased operational pressure on enterprises:

In April, as macroeconomic policies were implemented and market demand continued to recover, the effects were continuously evident. The automobile industry's revenue in January-April 2024 was 3.0742 trillion yuan, an 8% year-on-year increase; costs were 2.6882 trillion yuan, an 8% increase; profits were 142.8 billion yuan, a 29% year-on-year increase; the profit margin of the automobile industry was 4.6%, which is relatively low compared to the average profit margin of 5% for the entire industrial sector.

The automobile industry in January-April 2024 performed well in production and sales on a low base, but due to intense competition pressure, profits mainly came from exports and high-end luxury vehicles. Most other enterprises experienced a significant decline in profits, leading to increased survival pressure for some companies.

Domestic effective demand remains insufficient, and the external environment remains complex and severe. The recovery foundation of industrial enterprise benefits still needs to be consolidated. As fuel vehicles are still profitable but the market is shrinking rapidly, and new energy vehicles are experiencing high growth but significant losses, there is a significant contradiction between the two, increasing the operational pressure on enterprises.

CAAM mentioned that in May, the new product price war in the automotive market cooled down temporarily, and the repurchase policy at fixed prices further dispelled user concerns. Regarding the intense "price wars" phenomenon in the current Chinese automotive industry, Cui Dongshu, Secretary-General of CAAM, stated:

From January to May 2024, nearly 60 electric vehicles experienced price reductions, marking a rare price war. The background of the "price war" includes the decrease in raw material prices for new energy vehicles, rapid launches of new products in the new energy vehicle sector, and a penetration rate of new energy vehicles exceeding 40%

Price war is a manifestation of system capabilities and an inevitable stage in the development of the industry. After May, the "price war" has shown a trend of slowing down. Next, the domestic car market is expected to return to the norm of being mainly promotion-driven, without frequent 20% price cuts.

Car buying enthusiasm in June is expected to continue with good growth compared to the previous month

Looking ahead to June, the China Passenger Car Association expects the continuation of car buying enthusiasm:

In June this year, there are a total of 19 working days, which is two days fewer than last year's 21 working days, which is not conducive to the half-year sales sprint in June. As the passenger car market enters the final period of the first half of the year, localities and car companies are making strong efforts to boost sales performance. With the delivery of new car models accompanying the improvement of manufacturing system capabilities and the rapid release of production capacity to seize the initiative, June is still a month with a relatively good sales trend.

The number of candidates for the college entrance examination in 2024 reached a historical high of 13.42 million, which will also bring about a surge in demand for driving lessons and tourism after the exam, benefiting the continued strength of the car market in June. With the improvement in the experience of the third space of intelligent new energy vehicles and the stable expectation of comprehensive usage costs, the popularity of summer self-driving tours will increase again, making private car self-driving and other personalized, low-cost travel options more popular.

The spring wave of new car price cuts has ended, and the issuance of Beijing's electric vehicle license plates at the end of May, along with the renewal of old for new vehicles, will collectively drive the continuation of car buying enthusiasm in June.

The China Passenger Car Association also mentioned that the continued sluggishness in consumption of conventional fuel vehicles is an important factor restraining the overall recovery of the car market. This time, policies such as the renewal of old for new vehicles have reasonably ensured the replacement demand of the group of consumers of fuel vehicles, which is of great significance for the stable development of the car market. The country's comprehensive consideration and precise grasp of "promoting consumption and boosting domestic demand" are becoming increasingly clear and precise, and the consumption potential of the market for "eliminating old vehicles and purchasing new ones" will gradually be unleashed, which is beneficial for the gradual strengthening of the car market in the coming months.

In terms of exports, the China Passenger Car Association expects to maintain a good growth momentum:

From January to May 2024, the export of Chinese independent brand cars to overseas local markets increased by 57% year-on-year, with a 57% year-on-year growth in overseas retail sales of independent cars in May, continuing the strong growth momentum. Based on this, it is judged that China's passenger car exports in June will continue to maintain a good growth momentum, driving a relatively good month-on-month growth in the overall domestic and foreign sales volume of passenger cars in June