Credit：Visual China

Retail sales of passenger cars reached 1.775 million units, the second highest volume in July, even the sales represents a 2.3% year-over-year (YoY) decline and a 6.3% month-over-month (MoM) decline, according to a monthly market analysis report released by China Passenger Car Association (CPCA) recently. Retail sales of passenger vehicles from January to July totaled 112.99 million units, edging up 1.9% YoY.

While sales in July in historical records usually ranked the lowest after February, this year’s July witnessed the second highest retail sales of passenger cars to the date of the year, second only to sales in June, so sales in the past month maintained relatively strong even it had a modest slip from the peak, CPCA commented.

China began to implement the stricter vehicle emissions standards from July 1. The import, production and sales of vehicles that do not meet new phase VI (B) emission restrictions are prohibited from July. Following implementation of new emissions standards, the promotional campaign in the first half of the year that automakers and dealship launched to destock the unqualified vehicles came to an end, the auto market entered a period of flatter growth in promotion in July and the overall promotion efforts slightly dropped, CPCA commented. The auto industry body said the price move in July seems similar to the trend in 2019 as the effect of sales promotion has weakened.

In its preliminary statistics report earlier this month, CPCA said July is a typical off-season for auto market, but the local government’s stimulus policy was still strong, along with automakers’ ongoing promotion, helped maintain resilience of consumption. 

China’s Ministry of Commerce (MOFCOM) issued a notice in June to launch a nationwide promotion from that month to December to boost auto sales. The ministry said the promotional activities will focus on boosting consumption in the whole supply chain of the auto industry, including new vehicle sales, second-hand vehicle sales, upgrades and the automotive aftermarket. Localities with coordinate and plan auto consumption promotion activities and based on local recommendations, and governments of many counties and townships across the country will organize activities to promote sales of new energy vehicles (NEVs), according to the notice.

China's state planner the National Development and Reform Commission (NDRC) and twelve other government agencies released a host of measures to bolster automobile consumption in July. The public sector was required to increase purchase for NEVs and authorities would support purchase of NEVs or replacement with NEVs for public works, public transport, rental, postal services, sanitation, gardens and other fields in the public sector, according to the official document.

NDRC further rolled out a host of measures to spur consumption in late July. Its notice said China vowed to boost consumption of a wide range of items and services including NEVs as well as that in rural areas. The notice also said local authorities should not unveil new measures to restrict auto purchase, while regions that have already had restrictive measures on auto purchasing should improve these measures in order to adapt to local conditions. The notice called for building high-quality charging infrastructure, promote the use of NEVs in rural areas, and maintain and improve the favorable tax incentives for NEV purchase.

However, retail sales of NEVs, including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), dropped 3.1% MoM to 737,000 units in July, according to CPCA’s recent report.The sales of NEVs increased 30.7% YoY that month, compared with the yearly growth of 41.2% in the first seven months of the year. The past month is the second July in the record that NEV sales record a monthly decline. NEV sales in July last year fell consecutively due to Chinese government’s incentives such as subsidies to spur trade-ins of gasoline vehicles for electric ones. As the penetration rate of NEVs in China topped 30% and reached 36.1% in July, it became more difficult for the sector to maintain the high growth rate and it will be more likely to keep steady growth until market share of the fossil fuel vehicle is gradually eroded to achieve a new balance.

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