China Auto Sales Recovery on Track

Zacks

Automobile sales in China increased for the fourth consecutive month in Aug 2013, after months of sluggish growth owing to weak economic conditions and restrictions imposed by the government on new vehicles. The total vehicle sales in China witnessed year-over-year growth of 10.3% in August compared with 9.9% in July, according to the China Association of Automobile Manufacturers (:CAAM).

A total of 1.65 million vehicles were sold in the country during August, leading to sales of 13.95 million vehicles for the first eight months of 2013, up 11.8% on a year-over-year basis. Passenger vehicle (cars, multipurpose and sport-utility vehicles) sales also increased by 11% year over year to 1.35 million units in August compared with 10.5% in July. For the first eight months of the year, passenger vehicle sales rose 13.1% to 11.26 million units.

Meanwhile, commercial vehicle sales increased 7% year over year to 0.3 million units in August 2013. As a result, the sale of commercial vehicles improved 6.78% year over year to 2.69 million vehicles in the first eight months of 2013.

Among the U.S. automakers, General Motors Company’s (GM) sales went up 11.2% to 245,799 vehicles in the month, while Ford Motor Co.’s (F) sales continued to increase for the fourth consecutive month, soaring 46% to 71,183 vehicles in August.

Sales of Japanese automakers remained weak as they are still trying to regain the market share lost due to the political conflict between Beijing and Tokyo over disputed islands in the East China Sea. Among them, Nissan Motor Co. Ltd.’s (NSANY) sales inched up 1% to 86,000 units, while Toyota Motor Corp.’s (TM) sales declined 4.2% to 72,100 vehicles and Honda Motor Co. Ltd.’s (HMC) sales dipped 2.5% to 55,533 vehicles.

Meanwhile, sales of Germany’s BMW grew 34.6% to 34,166 vehicles in the month.

The steady growth in sales in China was mainly attributable to economic recovery and lower prices, along with hasty buying due to the possibility of increased regulations for new vehicle registration to combat increasing traffic congestion and pollution in Beijing. Further, a significant portion of the sales came from smaller cities, which offer unsaturated markets.

In 2009, China overtook the U.S. as the biggest auto market in the world by sales volumes when the Beijing government introduced a stimulus package, including tax incentives for small cars. However, the incentives were scrapped and the Beijing government imposed quotas on new car registrations in order to control traffic congestion.

Nevertheless, the nation has managed to regain its position as the world’s largest automobile market. Vehicle sales in China surpassed the August auto sales of 1.5 million units in the U.S. and 0.07 million units in the U.K. The CAAM expects automobile sales in China to cross the milestone of 20 million units for the first time this year.

Nissan currently carries a Zacks Rank #1 (Strong Buy), while General Motors, Ford and Honda Motors carry a Zacks Rank #3 (Hold).

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