Third-quarter outlook bright for light vehicle sales

INSIDE STORY

China’s light vehicle market posted a solid start in the third quarter of 2013, with sales of locally made cars, pickups, SUVs and vans hitting 1.43 million units in July, up 9.3 percent from a year earlier.

This result was in line with our expectations, and we believe it is a sign of things to come in the second half of the year.

Passenger vehicle sales outperformed the overall light vehicle market, with sales of locally made models increasing 12.8 percent in July from a year ago to 1.12 million units.

It was lower than the yearto-date growth rate of 16 percent in the first seven months of the year, but was still a good extension of the trend we saw over the previous few months.

Continuing to lead the way were the SUV and compact car segments.

SUV sales accelerated again in July with deliveries of 230,000 locally made vehicles, a surge of 43 percent from a year earlier.

The compact car segment, the largest in China’s passenger vehicle market, continued to gain ground.

Some 510,000 compact cars were sold in July, a rise of 19.4 percent year-on-year, well above the passenger vehicle market’s average growth of 12.8 percent in the month.

But performance of light commercial vehicles was poor in July, with sales decreasing 1.6 percent from a year earlier to 320,000 units.

We believe that light commercial vehicle sales were pushed up by carmakers at the end of the second quarter to achieve better results in the period, and that was paid back in July with slower sales.

Looking forward, the prospects for China’s light vehicle market in the second half of 2013 appears brighter than in the previous few months.

On the economic side, positive signs have been seen from industrial output and exports in July.

More significantly, the stabilizing of economic development has become a top priority in national economic policy, which we expect will enhance car-purchasing sentiment.

The inventory situation has also improved recently.

The Chinese Automobile Dealers Association’s inventory index decreased for the second month in June, indicating there is more room for sustainable growth for the rest of this year.

Possible car purchasing limits in some second-tier cities have emerged as one of the major risks for China’s light vehicle market in the upcoming years. But they are a positive factor for car sales in the short term as widespread rumors likely push forward future purchases. The writer is a senior market analyst at consultancy LMC Automotive, who can be contacted through bin.zhu@lmcauto.com