Carmakers rise after China vows to boost spending on autos as car sales fall for the first time in 27 years

  • The national economic planning agency says it will introduce policies to boost domestic consumption, without giving details
  • Domestic buying interest is hurt by slowing growth and the impact of US-China trade war
PUBLISHED : Wednesday, 09 January, 2019, 6:29pm
UPDATED : Wednesday, 09 January, 2019, 7:03pm

Mainland Chinese carmakers got a shot in the arm on Wednesday, as their shares surged after the national economic planning agency said it would make plans to bolster domestic spending on autos.

But whether the rally is sustainable remains to be seen, with incentive details yet to be unveiled.

Shares of auto companies including Great Wall Motor and Geely Automobile Holdings traded in Hong Kong jumped, buoyed by talks that policies to boost car consumption were in the works, as woeful sales in December dimmed the outlook for the auto industry.

Ning Jizhe, a vice-chairman of the National Development and Reform Commission, told state-owned China Central Television on Tuesday evening that spurring auto sales would be part of the efforts to expand domestic demand, and in turn boost the world’s second-largest economy.

He did not elaborate on the details, but the verbal support had been enough to drive up prices of auto stocks.

H shares of Geely, one of the most successful mainland carmakers, climbed 8.4 per cent to HK$11.08 (US$1.42) on Wednesday, partially recovering the previous day’s losses.

The company, which owns Volvo Cars and a stake in German carmaker Daimler, plunged 11.3 per cent on Tuesday after reporting a 44 per cent year-on-year sales decline in December alone.

It missed the full-year sales target for 2018.

As of Wednesday, Geely’s shares were 19.7 per cent lower than the close of HK$13.80 at the end of 2018.

Chinese carmaker Geely’s shares plunge 11.6pc after annual sales fall short of target, warns of dismal year ahead

Shanghai-listed A shares of Great Wall, the mainland’s largest maker of sport utility vehicles (SUV), surged to the daily trading limit of 10 per cent, closing at 6.25 yuan (92 US cents).

The company’s H shares were up 9.3 per cent to HK$4.71.

The economic slowdown and the tit-for-tat US-China trade war have largely dampened mainland consumers’ buying interest in passenger vehicles last year.

Passenger vehicle sales in the mainland dropped 5.8 per cent to 22.35 million units in 2018, China Passenger Car Association said on Wednesday. It was the first time since 1992, that China, the world’s largest auto market, reported a contraction in sales.

China’s once-buoyant auto sales hits a blip, likely to see the first quarterly decline in 26 years

But even with the enforcement of incentives, the auto market is unlikely to see a growth this year
Zhou Ling, Shanghai Shiva Investment

“The rally in auto stocks today showed that government support could be of help to Chinese carmakers,” said Zhou Ling, a fund manager with Shanghai Shiva Investment. “But even with the enforcement of incentives, the auto market is unlikely to see a growth this year. Most of the car companies will be targeting flat sales.”

The index compiled by financial consultancy that tracks all the mainland-listed carmakers and component manufacturers grew 1.6 per cent to 13,920.01 on Wednesday, compared to a 0.7 per cent gain in the benchmark Shanghai Composite Index.

Expectations are heightening that Beijing would cut auto purchase tax to stimulate sales.

The last time the central government reduced the tax was in 2015 when the rate was slashed from 10 per cent to 5 per cent for cars with engines of up to 1.6 litres.