China Is Back, Baby! Quarterly Auto Sales up First Time in Two Years

Matt Posky
by Matt Posky

With global economies suffering from pandemic-related lockdowns, there’s been just one question burning in the minds of economists: ‘When will Chinese automotive sales finally rebound so that the industry can once again feel comfortable enough to keep pouring resources into Central Asia?’

Now, apparently.

China’s car market just recorded its first quarter of year-over-year sales growth in two years, with last month’s volume rising 12.8 percent (vs 2019) to 2.57 million units, according to the China Passenger Car Association (CPCA). While its always wise to keep in mind that the nation has a history of obfuscating figures that might paint it in a bad light, CPCA has been slightly more consistent in its reporting than the China Association of Automobile Manufacturers (CAAM). Both outlets also have a tenancy to showcase blind optimism for the local economy, but there appears to have been good reason for that over the last five months.

General Motors likewise reported Chinese sales growing by 12 percent in the third quarter vs the same period a year earlier as German brands expressed their continued commitment to the market. That diminishes the probability that this is all hype drummed up by the Chinese Communist Party (CCP). But there may still be a sprinkle of economic witchcraft taking place.

China is betting the farm of electric vehicles and its automotive market has seemed to rise and fall by government decree. Whenever the CCP incentivizes EV sales, things start looking up. The inverse is true whenever subsidies are withdrawn — something we’ve pointed out on more than a few occasions, especially in response to government agencies buying up electric cars to help pad production figures. Ride-hailing and business fleets have also done their fair share, with industry leadership claiming individual drivers are starting to step up and take a stronger interest in EVs as subscription services help drive down the per-month cost of ownership (a sales tactic we’ve been hesitant to endorse).

There are reasons to be skeptical, however. Even though German brands appear happy to stick with the market for the long haul (Volkswagen remains the best-selling make in China), several other companies have quietly scaled back planned investments. Too much of China’s EV volume seems dependent on government approved fleet purchases with regular customers having a much harder time making the transition away from gasoline — which aren’t selling particular well as the CCP attempts to encourage electric sales. The Wall Street Journal had more in a recent market assessment:

As Chinese brands and gasoline-powered vehicles struggle to tempt consumers, “we can’t be too optimistic about the fourth quarter,” Cui Dongshu, the CPCA’s secretary-general, said Tuesday. He forecast year-over-year sales growth of between 5 [percent] and 8 [percent] for China in the October-to-December quarter.

The CPCA said auto makers’ sales of passenger cars to dealerships grew by 8.5 [percent] in September, while wholesale sales of new-energy vehicles, a category that includes electric cars, nearly doubled in September compared with a year earlier to more than 125,000 vehicles, marking the strongest rate of growth since April 2019. The group didn’t report retail figures for the category.

Tesla Inc. sold 11,329 Model 3s in China last month, a 4 [percent] drop from August, according to CPCA data. This month, the Palo Alto, Calif., electric car maker cut the starting price of its China-made Model 3 by 8 [percent] to about $37,000 and that of the Model S by 3 [percent] to about $109,000 to win back market share, posing a bigger threat to China’s gasoline-powered vehicles.

That’s absolutely fine with the CCP. As the world leader in battery production, China’s ideal scenario involves pushing other nations to go green. The State Council of the People’s Republic of China has even released a plan to ensure roughly 25 percent of national auto sales are of “new energy vehicles” by 2025. This proposal is supposed to work in tandem with President for Life Xi Jinping’s strategy of making China totally carbon neutral by 2060. While we doubtful the latter can be accomplished, it’s in the country’s best interest to try to get the rest of the globe to make similar promises is a clever strategy. Other nations have been working on perfecting the internal combustion engine for decades, whereas electric development is newer and offers a leveler playing field for China.

[Image: Xujun/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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2 of 5 comments
  • EBFlex No they shouldn’t. It would be signing their death warrant. The UAW is steadfast in moving as much production out of this country as possible
  • Groza George The South is one of the few places in the U.S. where we still build cars. Unionizing Southern factories will speed up the move to Mexico.
  • FreedMike I'd say that question is up to the southern auto workers. If I were in their shoes, I probably wouldn't if the wages/benefits were at at some kind of parity with unionized shops. But let's be clear here: the only thing keeping those wages/benefits at par IS the threat of unionization.
  • 1995 SC So if they vote it down, the UAW gets to keep trying. Is there a means for a UAW factory to decide they no longer wish to be represented and vote the union out?
  • Lorenzo The Longshoreman/philosopher Eri Hoffer postulated "Every great cause begins as a movement, becomes a business, and ends up as a racket." That pretty much describes the progression of the United Auto Workers since World War II, so if THEY are the union, the answer is 'no'.