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Analyst Blog

According to the China Association of Automobile Manufacturers (CAAM), vehicle sales in China went up 19.5% to 2.84 million units in Jan–Feb from 2.37 million units a year ago. The increase in sales was much higher than last year. In 2012, sales grew 4.3% to 19.3 million vehicles.

However, sales fell 13.6% in Feb due to the Lunar New Year holidays. However, strong sales by Ford Motor Co. (F - Free Report) and Hyundai Motor Co. lifted sales in the world’s biggest market during the period. Sales of vehicles, including buses and trucks, escalated 15% to 3.39 million units in the first two months of the year, according to the CAAM.

Ford reported a 46% rise in sales to 105,209 vehicles while Hyundai reported more than 40% increase in sales to 177,000 vehicles in the period. General Motors Company (GM - Free Report) and its Chinese joint venture partners sold 525,835 vehicles in the period, up 7.9% from Jan–Feb 2012.

Sales of Japanese brands, including Toyota Motor Corp. (TM - Free Report) , Nissan Motor Co. (NSANY - Free Report) and Honda Motor Co. (HMC - Free Report) , hampered due to the political conflict between Beijing and Tokyo over disputed islands in the East China Sea. According to the CAAM, sales of Japanese passenger cars dipped 17.1% year-over-year in Jan-Feb this year.

Sales of Volkswagen AG’s (VLKAY - Free Report) Audi, improved 16% in the period. Audi is the top-selling luxury brand in China. However, Daimler AG’s (DDAIF - Free Report) Mercedes-Benz posted a 39% decline in sales to 26,829 vehicles during the period under study.

According to the CAAM, auto sales in China are expected to rise 7% to more than 20 million vehicles in 2013, led by strong demand for passenger vehicles and economic recovery. The association believes SUVs will remain the fastest- growing segment in the year while commercial vehicles will record a moderate gain in sales.

However, the Chinese government is concerned about rising air pollution in the country due to the ever increasing vehicles on the road. As a result, China’s State Council announced a stricter standard for auto fuel recently, which will be promoted nationwide by 2017. These steps may damage the health of the auto industry in China.