Car sales sentiment improves in June, fuelled by government polices

Auto industry gauge suggests Volkswagen is still the buyers’ favourite

PUBLISHED : Wednesday, 06 July, 2016, 7:55pm
UPDATED : Thursday, 07 July, 2016, 12:05am

Consumer confidence in China’s new car market remained strong in June, despite the national economic slowdown, with analysts now suggesting government support schemes will continue to bolster sales in the third and fourth quarters of the year.

According to the MNI China Car Purchase Indicator, a composite gauge of overall conditions in the domestic car market, spending sentiment rose 0.5 per cent to 92.0 in the month, from 91.5 in May.

Overall, the MNI Indicator — which is produced by Deutsche Borse Group-owned markets intelligence provider, MNI — showed that car purchase expectations were up 0.4 per cent, while gasoline price expectations of respondents dropped 0.5 per cent since May.

Deluxe brands sold especially well in the mainland, it said.

In the second quarter, Volkswagen consolidated its position as buyers’ favourite brand, registering 26.6 per cent of respondents’ votes compared to 20.4 per cent in March.

Audi rose to second place claiming 14.9 per cent of responses, up from just 8 per cent in the first quarter.

BYD was the most popular domestic brand, despite slipping from fifth place in March to eighth in June, holding 2.7 per cent of votes.

The rise in car sales sentiment, however, is in contrast to other recent consumer confidence studies, which have indicated people are cutting spending in mainland China, due to the slower economy.

Many analysts now believe the country’s second-quarter growth will come in below expectation, after first-quarter gross domestic product expanded 6.7 per cent, its slowest quarterly growth in seven years.

Bank of America Merrill Lynch analysts Jeff Chung and Fujia Liu said recently growth will be attributable to government support frameworks, and highlighted local auto companies as likely to benefit.

Citing figures from the China Passenger Car Association (CPCA), they expect more government support for the sector this year, while the association itself expects China’s passenger cars sales to grow 15 per cent year-on-year in the third quarter, and accelerate 10 per cent in the fourth quarter.

The study also said the CPCA expects the national government to maintain its current stimulus policy that halved the 10 per cent purchase tax on vehicles which has helped boost sales since being introduced last September.

To further push replacement car sales, the CPCA also believes that car license restrictions in force in many cities could be removed over the next few years.

There is “a high chance” it said, that the 3,000 yuan fuel efficiency subsidy will be re-launched in Jan 2017.