China Passenger Car Association: The March auto market started slowly, and the Beijing Auto Show will be the indicator for the subsequent market trends

On April 9th, the China Passenger Car Association released the March analysis report of the passenger car market.

The report pointed out that in March, stimulated by the post-holiday consumption recovery brought by the Spring Festival, the Chinese auto market achieved growth both year-on-year and month-on-month. From March 1st to 31st, the retail sales of passenger cars reached 1.687 million units, an increase of 6.0% year-on-year and 52.8% month-on-month; the cumulative retail sales from January to March reached 4.829 million units, an increase of 13.1% year-on-year.

The China Passenger Car Association emphasized that at the policy level, the Ministry of Commerce's promotion of the "Hundred Cities Joint Promotion" Auto Festival and the "Thousand Counties and Ten Thousand Towns" New Energy Vehicle Consumption Season activities have shown results. However, due to the rapid escalation of price wars after the Spring Festival, there has been a noticeable consumer wait-and-see attitude, coupled with attention to some new cars and expectations for the old-for-new policy, resulting in a slow start for the overall March auto market.

Looking at the data from the first quarter, the auto market's retail sales have basically achieved the expected trend of a good start. Policy efforts and joint promotions by companies have provided stable support for the early-year auto market, and the old-for-new policy has also sparked strong consumer expectations.

New Energy Vehicle Domestic Retail Penetration Rate in March Reaches 41.6%

In terms of new energy vehicles, both production and sales of new energy passenger cars saw significant growth in March. Production for the month reached 788,000 units, an increase of 25.2% year-on-year and 84.9% month-on-month.

In terms of wholesale, the wholesale sales volume of new energy vehicles in March reached 810,000 units, an increase of 31.1% year-on-year and 81.3% month-on-month. The wholesale penetration rate was 37%, an increase of 6 percentage points from the 31% penetration rate in March 2023. In March, the penetration rate of domestic brand new energy vehicles was 51.1%; luxury car new energy vehicles had a penetration rate of 33.6%; while mainstream joint venture brand new energy vehicles had a penetration rate of only 6.1%. The top three wholesale sales models were all new energy vehicles, namely BYD Song, Model Y, and BYD Qin.

In terms of retail, 709,000 units were sold in March, an increase of 29.5% year-on-year and 82.5% month-on-month. The domestic retail penetration rate was 41.6%, an increase of 7.6 percentage points from the 34% penetration rate in the same period last year. In March, the penetration rate of domestic brand new energy vehicles was 63.3%; luxury car new energy vehicles had a penetration rate of 28.4%; while mainstream joint venture brand new energy vehicles had a penetration rate of only 7.4%. In terms of monthly domestic retail market share, the share of mainstream domestic brand new energy vehicles in March was 62%, an increase of 3.4 percentage points year-on-year; joint venture brand new energy vehicles had a share of 4.5%, a decrease of 0.7 percentage points year-on-year; new energy brands had a share of 11.6%, an increase of 2 percentage points; Tesla had a share of 7.7%, a decrease of 4.7 percentage points In March, the market share of new energy vehicles reached 11.6%, an increase of 2 percentage points year-on-year. Overall, new energy vehicle sales of companies like Li Auto and Nio remained strong both year-on-year and month-on-month. Among mainstream joint venture brands, Volkswagen led the pack with a total wholesale of 17,822 new energy vehicles, capturing a strong 48% share of the mainstream joint venture pure electric vehicles. Volkswagen's firm electrification transformation strategy is starting to show results. Other joint ventures and luxury brands are still in need of further efforts.

In March, there was a significant growth in the export of new energy vehicles, with 120,000 units exported, a year-on-year increase of 70.9% and a month-on-month increase of 52.8%. New energy vehicles accounted for 29.7% of passenger car exports, an increase of 5.6 percentage points from the same period last year. Pure electric vehicles accounted for 82.3% of new energy vehicle exports, with A0+A00 level pure electric vehicles representing 58% of independent new energy vehicle exports.

The China Association of Automobile Manufacturers pointed out that with the emergence of China's scale advantage in new energy vehicles and the expanding market demand, more Chinese new energy vehicle brands are gaining recognition overseas, despite recent disruptions in Europe. The outlook for the new energy vehicle export market remains positive in the long term.

Overall, the China Association of Automobile Manufacturers commented that the overall trend of new energy passenger vehicle companies in March was strong. BYD's pure electric and plug-in hybrid dual-drive models solidified its leading position in independent new energy brands. Extended-range electric vehicles represented by Tesla, Li Auto, Changan Auto, and Leapmotor performed particularly well. With the simultaneous introduction of multiple new energy vehicle models by independent car companies, the market base continues to expand. Thirteen manufacturers achieved monthly wholesale sales of over ten thousand new energy vehicles, accounting for 86.7% of the total new energy passenger vehicles.

Outlook for April Auto Market: Beijing Auto Show to be Key Indicator

The China Association of Automobile Manufacturers emphasized that April this year has 22 working days, two more days than April 2023. Due to the rescheduled "May Day" holiday, it will have a positive impact on the April auto market.

Moreover, the Beijing Auto Show will open on April 25th. The China Association of Automobile Manufacturers believes that the resumption of the Beijing Auto Show will not only showcase new industry technologies and products but also present a new image for brands, attracting widespread attention. The combination of the auto show and the implementation of consumption promotion policies across various regions will serve as a catalyst and trigger for domestic car consumption. The performance of auto show orders will be a key indicator to assess the market sentiment.

Since the series of price reductions that began after the Chinese New Year in February and the continuous upgrades of new energy vehicle models launched since 2022, consumers have adopted a wait-and-see attitude, hoping for stability in the market before making a purchase. With the recent listing of Xiaomi cars and further adjustments in prices of related models, coupled with the intensive release of new models in April, market enthusiasm is expected to gradually increase.

Driven by national consumption promotion policies and corresponding policies in various provinces and cities, offline activities at the auto show will invigorate the market atmosphere and accelerate the gathering of public interest In addition, the China Association of Automobile Manufacturers also stated that this year's 5-day May Day holiday is a good time for driving trips, and the experience of high-level assisted driving for self-driving tours is better. In the past two years, self-driving tours have been continuously popular, and travel consumption will effectively drive the demand growth of new purchases and upgrades.

China accounted for 62% of the world's new energy vehicle market share in January-February, but the profit margin was only 4.3%

Furthermore, data collected by the China Association of Automobile Manufacturers also shows that in January-February 2024, global car sales reached 12.65 million units, with new energy vehicles reaching 1.9 million units, accounting for 15% of the total. Among them, the proportion of pure electric vehicles reached 9.8% in January-February 2024, while plug-in hybrids reached 5.2%, and hybrid vehicles accounted for 6.4%, with an increase in the proportion of hybrid electric vehicles. Due to the high base and adjustments in subsidy policies in various countries, the new energy passenger car market in Europe and America did not start strong in 2024.

Due to the influence of the Spring Festival factor and price wars, China's car sales accounted for 32% of the world market share in January-February 2024, with new energy passenger cars accounting for 62% of the world's new energy vehicles. The performance of the Chinese auto market in the global market was relatively stable in January-February. With the contribution of new energy vehicle exports, the overall world position of Chinese auto companies has significantly improved, with Chery Automobile, Geely Automobile, Changan Automobile, and Great Wall Motors all showing a significant increase in their world market share.

However, despite the continuous growth in the market share of new energy vehicles, the profit level of the automotive industry remains low. The China Association of Automobile Manufacturers stated that in 2023, the automotive industry's revenue was 10.976 trillion yuan, a year-on-year increase of 12%; costs were 8.7627 trillion yuan, an increase of 13%; profits were 508.6 billion yuan, a year-on-year increase of 5.9%; and the profit margin of the automotive industry in 2023 was 5.0%, which is relatively low compared to the average profit margin of 5.8% for the entire industrial sector.

For comparison, the profit margin of the automotive industry was 8.7% in 2015. Currently, the industry faces tremendous pressure from the rapid decline in profit margins.

The China Association of Automobile Manufacturers analyzed:

In January-February 2024, the production and sales of the automotive industry performed well under a low base, but due to excessive competitive pressure, profits mainly come from exports and high-end luxury vehicles. Most other enterprises have experienced a sharp decline in profits, with increased survival pressure for some companies. The current conventional fuel vehicle business is still profitable but with low margins, and the market size is shrinking rapidly; new energy vehicles maintain a moderate to high growth rate but with significant losses, leading to significant contradictions and pressures. Therefore, the central and local governments are stabilizing automobile production, actively promoting the "scrappage for new" policy to stabilize conventional fuel vehicle consumption, and the overall situation of the automotive industry is stable and improving.

Looking at import countries, in January-February 2024, the countries with relatively strong growth in imported cars were Japan, South Korea, Sweden, the Netherlands, and other main countries, especially with good growth in imported cars in February in Japan and South Korea. The countries with relatively large declines in imported cars in January-February 2024 were Germany, Slovakia, the United Kingdom, Hungary, Austria, and other European countries, likely affected by the Red Sea crisis