Automobiles China Passenger Vehicle Monthly - March: V-shaped recovery, U-shaped or L-shaped?

The COVID-19 pandemic has caused supply-side and demand-side disruptions. March China passenger vehicle (PV) wholesale volume declined 48% Year over year, leading 2020 YTD wholesale to drop 45%.

14 Apr 2020

China PV monthly sales volume

Source: CPCA

The figure charts the monthly sales volume of passenger vehicles in China from May 2016 to February 2020. Over time, the sales volume rose and fell, but stayed above 1,200,000 units until February 2020, when sales volume fell below 600,000. The volume rose again in March 2020, but not to previous levels.

Year-to-date wholesale and retail down 45%/39%

March China passenger vehicle (PV) wholesale volume declined 48% Year over year, leading 2020 year-to-date wholesale to drop 45%, as per the China Passenger Car Association (CPCA). The numbers were slightly worse than we expected. Insurance data, a close proxy for retail, dropped 31% Year over year in March, leading to a 39% year-to-date volume decline. The dealer association data suggested 2.68 months of dealer inventory in March. We think that is mainly a denominator effect, given relatively low monthly sales, while absolute dealer inventory did not increase.

How long will the decline last?

The COVID-19 pandemic has caused supply-side and demand-side disruptions. We expected the negative impact to last into Q2, with a 20% volume decline in April, while the latest recovery trend seems moderately milder than we thought. We now think the recovery may happen in 3Q20, with 10% Year over year growth, given the low base in 2019. With the auto market heading into its third straight year of decline, the government stepped up some supportive measures in late March on electric vehicles, trucks and used cars. We think the impact on total auto sales is still limited. We do not rule out potential supportive policies on new gasoline cars coming out in the next few months.

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