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China 1st Half 2015: Domestic carmakers regain ground in shy market

Haval H6 China June 2015. Picture courtesy auto.sohu.comThe Haval H6 leaps to third place overall so far in 2015.

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If over the period the Chinese new light vehicle market is still up by 5% to 10.10 million units while sales of all new vehicles (including buses and commercial trucks) are up 1% to 11.85 million units, the unthinkable happened in June when the market actually declined year-on-year for the first time since December 2008. Imports are hit even harder at -22% over the first 5 months of 2015 to 434.423 units: SUV imports are down 20% to 278.022, sedan imports down 27% to 136.354 and MPV imports down 9% to 20.047, according to the China Automobile Dealer Association.

Wuling Hongguang China June 2015. Picture courtesy of cheshi.com2The Wuling Hongguang is still #1 in China but drops 19%.

However as Automotive News China points out, there is no need to panic. And this for 3 main reasons. First, Chinese sales look weak in 2015 because of an extraordinarily high base at the same time last year when sales where inflated by panic buying induced by rumors some municipalities would restrict car sales in order to ease traffic congestion and pollution. In Nanjing, panic buying pushed sales up 60% over H1 ’14 and that market is now down 19%. Second, the Chinese stock market has had a double negative effect: when it surged, consumers invested in it instead of buying a car, now that it is tumbling down, investors can’t afford to buy the luxury car they were planning.

VW Jetta China June 2015. Picture courtesy of product.xgo.com.cnThe Volkswagen Group, although down 4%, still has the 3 best-selling sedans in China.

Third, the method of Chinese sales reporting has changed this year, switching from wholesale to retail. Given Chinese laws allow automakers to set sales targets without consulting dealers, they have dumped excess car inventories on dealers, making wholesale deliveries higher than retail ones. With most automakers now reporting retail sales – closer to reality – the overall figure looks more disappointing that it really would if compared with retail sales in 2014. These 3 reasons will smooth themselves out over the next year or so and the market should start growing again, lifted by exceptional demand in more rural areas.

Baojun 730 China June 2015. Picture courtesy of autohone.com.cn300.000 Baojun 730 have hit Chinese roads in a year.

The Volkswagen Group is down 4% to 1.74 million units: the first time its First Half sales decline in China since 2005 when they fell 14%. General Motors is up 4% to 1.72 million deliveries, saved by SUV and MPV sales. In the detail: Buick is up 4% to 436.226 units, Chevrolet is up 0.6% to 317.408, Cadillac up 14% to 39.444, Baojun up 4-fold to 159.511 deliveries thanks to the 730 – this trend should continue in H2 with the arrival of the 560 SUV presented at Auto Shanghai, but Wuling is down 5.5% to 764.172 units.

JAC Refine S3 China June 2015. Picture courtesy auto.sohu.comThe JAC Refine S3 is the third best-selling SUV in China so far in 2015.

The Wuling Hongguang remains the best-selling vehicle in China by far but sees its volume reduced by 19% to 313.300 units above the VW Lavida at 233.200 (-11%). The top of the models ranking brings to light the return to form of domestic manufacturers in their home market rather spectacularly: the Haval H6 is up 20% to climb onto the podium with 172.000 deliveries while the Baojun 730 confirms its status of most successful nameplate launch in the history of automobile in China, adding up to 158.000 units so far in 2015 and 278.000 since introduction.

Haval H2 China June 2015. Picture courtesy autohome.com.cnHaval H2

The VW Santana (-6%), Jetta (-2%) and Nissan Sylphy (-2%) follow. Note that if Volkswagen underperforms in China this year, the German carmaker still has the 3 best-selling sedans in the country and places 6 nameplates in the overall 2015 Top 12: Lavida (#2), Santana (#5), Jetta (#6), Sagitar (#9), Tiguan (#11) and Passat (#12). Keeping with sedans, notice also the Toyota Corolla (+156%), Geely EC7 (+56%) and ChangAn Eado (+35%) making sparks.

Top 10 best-selling SUVs in China – H1 2015:

PosModel2015/142014Pos
1Haval H6172,00620%143,1191
2VW Tiguan131,5633%127,5492
3JAC Refine S391,859new0
4ChangAn CS3588,75465%53,7128
5ChangAn CS7586,9091356%5,97138
6Haval H277,158new0
7Beijing Auto Huansu S372,822new0
8Nissan X-Trail70,25387%37,51517
9Ford Kuga68,3963%66,2255
10Buick Envision65,851new0

The SUV segment is the one where the progress of domestic manufacturers is the most spectacular. As we have studied in the Chinese Q1 2015 update, the pace at which Chinese carmakers have launched successful and affordable SUVs represents an additional pressure towards foreign carmakers and has played a significant role in the struggling of Volkswagen so far this year. Over the period, 6 of the Top 7 best-selling SUVs in the country are Chinese vs. just one at the same time one year ago! The JAC Refine S3, ChangAn CS35, CS75, Haval H2 and Beijing Auto Huansu S3 have all hit the bullseye with Chinese customers, while in the foreign aisle the Nissan X-Trail (+87%) and Buick Envision have seen the most impressive surges.

Ford Escort China June 2015. Picture courtesy of auto.163.comFord Escort

All-in-all, it’s an astounding 76 all-new locally-produced nameplates that have made their entrance in the Chinese sales charts over the past 12 months. If the Baojun 730 evolves at stratospheric heights, Ford must be commended for the launch of the Escort which was a risky move that was bound to cut deep into Focus numbers (-32%). The Escort shines at #18 and just under 107.000 deliveries. Further down the ladder, the Toyota Levin (#45), BYD S7 (#46), Honda Vezel (#59) and its twin the XR-V (#63) as well as the Hyundai ix25 (#68), VW Lamando (#72), Haval H1 (#81), Kia K4 (#86), Citroen C3-XR (#106) and Venucia T70 (#112): all are instant blockbusters and a testimony of the incredible buoyancy the Chinese market is still enjoying.

Wuling Hongguang V China April 2015. Picture courtesy auto.sohu.comWuling Hongguang V

Zooming in on the Light Commercials market down a harsh 27% to 1.937.497 deliveries, the Foton Light Truck takes the lead thanks to sales down ‘just’ 15% to 135.000 while all microvans, once reigning supreme over the segment, implode: the Wuling Sunshine (#2) is down 29%, the Wuling Rongguang (#4) is down 43% and the Chana Mini Bus (#6) down 41%. The new LCV trend in China is towards micro pickups – with the Wuling Mini Truck up 10% to 109.400 sales and #1 in June – and larger minivans. Perfect illustration: the thunderous arrival of the Wuling Hongguang V, a step up from the Rongguang and in essence the commercial version of the best-seller Hongguang MPV. The V sells a huge 119.538 units in H1 but seems to already have lost some steam by June at 15.999 sales after hitting 30.000 units in March.

Baojun 560 China June 2015. Picture courtesy auto.sohu.comThe Baojun 560 could help keep SUV sales growing fast in H2 2015.

What’s next for China? We touched on this in STRATEGY: Where is China headed?. In the coming months, we should see MPV sales flatten further but SUV deliveries continue to rise, especially with the imminent arrival of the Baojun 560.

Previous post: China June 2015: First monthly year-on-year decline in over 6 years

Q1 2015 post: China 1st Quarter 2015: Baojun 730 and Ford Escort superstars

FY 2014 post: China Full Year 2014: Growth cools to 7% to record 23.5 million sales

One year ago: China 6 months 2014: Santana makes it 4 Volkswagens in Top 6

Full H1 2015 Top 391 All-local models and Top 10 LCVs vs. Full H1 2014 figures below.

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