Engaged in the automotive industry for more than twenty years, I have never seen such a sad "May Day" holiday. All the information I have received or seen from this writer suggests that the growth trend that has just been established in the automotive industry is likely to begin to turn downward again this year, or rather on This May Day.
The terrible thing about this trend is that even in 2020, in the early days of the new crown epidemic, when the situation in Wuhan was much more severe, the automotive industry has never been as disconnected as it is now, and several unfavorable factors are superimposed on each other - in addition to the epidemic, there are chip shortages, soaring prices of raw materials such as lithium, geopolitical conflicts and other "black swans".
It is also important to point out that after May Day every year, there will actually be a relatively flat -- and this situation may continue until August, and then it will enter the industry peak season known as "Golden Nine Silver Ten". All of the above factors show that the upcoming holiday is not a relaxing holiday for the automotive industry at all. At least some of the leading data already suggests that industry trends are getting worse.
Car sales began to struggle
According to data released by the National Passenger Car Market Information Federation, in March, which has released data, passenger car retail sales were 1.579 million units, although up 25.6% month-on-month, it looks good, but it fell by more than 10% year-on-year. In addition, the cumulative sales figures are not very good – the total retail sales in the first three months of this year were 4.915 million units, down 4.5% year-on-year.
For the Chinese auto industry, this is a dangerous sign. Because since the start of the Chinese auto market in 2000, it has only begun to really decline in 2018 (28.08 million units, a decline of 2.8%), and the decline has lasted for 3 years, until 2021, when it can be regarded as a new rise out of the trough (26.275 million units, an increase of 3.8%). Now the cumulative sales volume in the first quarter is down year-on-year, which makes it full of variables to continue to maintain the rally throughout the year.
It is a pity that in fact, the sales trend in the first two months of this year is actually quite good. According to data from the Association of Passenger Vehicles, passenger car sales in February reached 1.177 million units, up 371.9% year-on-year, and the cumulative number of vehicles in January and February reached 3.33 million units, an increase of 69.6% year-on-year. This shows that it was the crotch pull performance in March that made the sales trend of passenger cars begin to change dramatically.
So the question is – what happened in March that dragged down the performance of the entire automotive market? In fact, most of them are the factors mentioned above, but unfortunately, this wave of the new crown epidemic has hit Shanghai, and Shanghai is called the automobile capital of China, not only the giant car companies such as SAIC Motor, but also a large number of industrial chain companies gathered here in the past few decades - with Shanghai in a de facto state of sealing, the operation of the entire automotive industry chain has been greatly affected.
It is difficult to reverse the decline in sales when resuming work and production
People suddenly realized the importance of Shanghai to China's automotive industry, which began with the sentence of He Xiaopeng, chairman of Xiaopeng Motors, that "if Shanghai cannot achieve dynamic resumption of work and production, all car companies in China may face suspension of production in May", and then Yu Chengdong, head of Huawei's intelligent car business, expressed a similar view.
At this time, most people really understand that Shanghai's automobile production not only accounts for almost 10% of the country, but also the auto parts companies gathered in Shanghai maintain the lifeblood of the entire Chinese automobile industry. It should be pointed out that these parts companies not only supply shanghai car companies, but also supply car companies located in Guangzhou, Chongqing and even abroad.
One example is the Japanese auto company Mazda, which announced about two weeks ago that two factories in Japan would shut down for about six days because of the COVID-19 pandemic in Shanghai. This shows that Shanghai is not only the core of the supply chain of China's automotive industry, but has become a key component of the global automotive supply chain to some extent.
It is based on this that although Shanghai has announced the list of "resumption of work and production", similar to Tesla, SAIC Volkswagen and other head car companies have begun to resume production through the "closed-loop production" model, but the industry institutions are still not optimistic about the sales expectations in April - the Association expects that passenger car sales in April will be 1.1 million, a year-on-year and month-on-month decline of more than 30%. To some extent, this means that the impact of the epidemic in Shanghai on the sales volume of China's automobile market will be difficult to end in the short term.
Two bright spots under the gloom of sales
Despite the unprecedented downward pressure of sales, as the world's largest automobile market and the world's largest new energy vehicle market, the Chinese auto market still presents two bright spots, which will have a profound impact on the development of China's auto industry, that is, the rise of China's own brands and the rapid development of new energy vehicles.
According to the data of the Association of Automobile Manufacturers, among the top five brands in Automobile Sales in March, independent brands occupied three seats, namely Changan Automobile, BYD and Geely Automobile, and all of them achieved positive year-on-year growth, of which BYD increased by 161.4% year-on-year, and the lowest Geely also had 3.8%. Correspondingly, FAW-Volkswagen and SAIC-GM-Wuling, which ranked first and fifth, fell by 40.2% and 22.4% respectively year-on-year.
This shows that independent brands are seizing the opportunity of transformation and upgrading of the automotive industry, achieving sales counterattack, and beginning to engage with joint venture brands. This involves another bright spot, that is, new energy vehicles.
The data shows that in the case of the overall car market sales decline throughout March, the sales of new energy vehicles continue to continue the strong trend. Wholesale sales in March were 455,000 units, up 122.4% y/y and 43.6% sequentially. Cumulative wholesale sales from January to March this year totaled 1.190 million units, up 145.4% year-on-year. All indications are that after the explosive growth of more than 3.52 million units in 2021, new energy vehicles will continue to achieve soaring sales this year.
Among new energy vehicle companies, although Tesla occupies a dominant position in terms of total volume, domestic brand BYD is catching up, with sales of more than 104,000 vehicles in March, and it has been clearly no longer producing fuel vehicles, focusing on new energy vehicles. It is worth mentioning that because the price of raw materials, including lithium, has risen sharply, the cost of new energy vehicles has risen rapidly, and major car companies have raised the terminal price, but even in this case, consumers' enthusiasm for new energy vehicles is still undiminished.
The people evaluate the car
The automotive industry is a core industry related to the national economy and people's livelihood, so similar to the situation that the mainstream car companies are almost waist-chopped, it is absolutely not conducive to the development of the entire industry, especially the Chinese automobile industry is in the key window period of seizing the dominance of new energy vehicle innovation, so favorable policies are also being introduced.
So far, some places have introduced measures to encourage the consumption of new energy vehicles, among which it is worth mentioning that Shenzhen has launched the "Several Measures of Shenzhen Municipality on Accelerating the Construction of An International Consumption Center City", and "the unified reward for the purchase of new energy vehicles is 5,000 yuan" which has aroused heated discussion in the industry. This policy can stimulate the consumption of new energy vehicles in the short term, help the industry to carry through the four relatively flat off-season ranges of 5, 6, 7 and 8, and after entering September, it is expected that the Chinese auto market will usher in a new consumer demand release cycle.
According to the "People's Evaluation of Cars" and a number of industry insiders, the major mainstream brands have insufficient confidence in the current state of the car market, more or less affected by the lack of supply chain, resulting in the inability of normal production of the whole vehicle. Even if many factors can be slowly alleviated after the May Day holiday, the overall decline of the global auto market and even the Chinese auto market in 2022 may be a foregone conclusion.