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According to data released by the China Association of Automobile Manufacturers (CAAM), new light vehicle sales in China gain 2.3% year-on-year in June to 1.874.200 units. For the second consecutive month, the market is surprisingly pulled up by very dynamic sedan sales at +9.1% to 963.400. But the June thunderclap is the year-on-year drop of SUV sales at -0.5% to 737.600 units. After losing share year-on-year for the first time in 6 years last month, we estimate that this is the first decline for SUV sales in China in 9 years, since 2009 at a time when the segment only accounted for 8% of overall light vehicles sales vs. 39% this month. Now let’s pause for a minute to digest what is a spectacular trend reversal in the largest car market in the world. Up until two months ago, SUVs had been the unique engine of growth in the Chinese light vehicle market, the only segment enjoying year-on-year gains for the past couple of years just as all others (sedans, MPV and microvans) were declining sharply. So much so that almost all China-made car launches in the past two years have been SUVs, a new model trend that will continue deep into 2018 as these were conceived during the heydays of the SUV boom.
Is this the end of the SUV boom in China, and the world?
If one month of weakness could definitely be deemed a freak event, poor SUV sales have now been on display for two consecutive months in China, with the trend accelerating in June and pulling the segment into negative growth. It’s no secret that the SUV sales boom has been decelerating for some time already, with the explosive growth of 2015 (+52%) and 2016 (+45%) dampened by a more measured but still very impressive +13.3% in 2017. Before the slump of May, SUV sales were still up 12.9% year-on-year over the first 4 months of 2018 and remain more dynamic than sedans over the First Half of 2018 at +9.7% vs. +5.5%. However a worrying indicator is that the sudden fall of grace of SUVs in China is not just affecting a few selected models but is damaging the June sales of most best-sellers including the Haval H6 (-25%), Baojun 510 (-33%), VW Tiguan (-35%), GAC Trumpchi GS4 (-50%), Honda XR-V (-29%) and Changan CS75 (-44%).
Let’s not get ahead of ourselves, but it does appear that the Chinese have suddenly fallen out of love with SUVs, not just a couple of brands they could have been tired of. It’s useful to also keep in mind that a majority of local carmakers had dropped their prices significantly over the last couple of years in order to fuel continued growth (I’m looking at Haval here), and they are being caught up with this practice now with “real” sales exempt of price drops actually pretty weak. If confirmed over the next few months, this sudden turn of events will have a huge impact on the worldwide car industry as most global carmakers are now strongly influenced in their decision-making by the Chinese market. The plethora of SUVs that is still scheduled to hit dealerships over the next 18 months could find itself having a much harder time to shine. If confirmed, this sudden SUV slump will hurt Chnese carmakers much more than foreigners as the locals have put all their eggs in the SUV basket to survive over the past 5 years with foreign manufacturers struggling to keep their unabated SUV launch pace. A weakness that could turn out in foreign carmakers’ advantage: the manufacturers that will be able to weather this unexpected storm unscathed are the ones able to swap their reliance to a strong sedan lineup – and Volkswagen is best placed here.
So if the SUV sales tap is drying out, where else can the Chinese market look for sustained growth? Sedans are the first bet with very dynamic sales over the past two months offsetting the SUV weakness to deliver overall monthly gains in the light vehicles segment. Meanwhile minibus sales drop 0.5% to 43.900 which is a striking slowing down of its freefalling pace over the past 5 years, but MPVs struggle again at -21% to 129.300 this month. Although they still account for a tiny part of the Chinese market, eco friendly cars continue to gallop ahead, up 43% to 84.000 in June, with EV sales up 30% to 62.000 and plug-in hybrids doubling year-on-year to 22.000. Finally, commercial vehicle sales surge 18% in June to 399.000 thanks to robust demand from shippers and domestic logistics providers. All-in-all, the Chinese total vehicle market is up 4.8% to 2.273.000 units in June, a new record for the month.
A direct illustration of the increased sedan weight in carmaker’s fortunes this month is the China-made brands ranking, with the entire Top 6 in positive thanks to solid sedan sales. Volkswagen (+2%) ends the month just under 254.000 wholesales, that’s more than double any other carmaker in the country. Honda (+1%), Toyota (+4%) and Nissan (+16%) also shine but it’s Hyundai (+147%) that performs best near the top, offsetting a paltry start of 2017 handicapped by negative buyer sentiment towards South Korea in the wake of a tense North Korea situation. Up a formidable 35% on June 2017, Geely remains by far the best-selling Chinese brand at home, celebrating a 27th consecutive month of double-digit year-on-year gains and its 10th month in a row above 100.000 units. In the remainder of the Top 10, only Chevrolet (+18%) impresses while Baojun (+3%) has now stabilised and both Buick (-22%) and Changan (-20%) freefall.
Mercedes (+27%) is back above Audi (-4%) as the #1 premium brand in China in terms of wholesales, with BMW (+20%) also in great shape but almost 9.000 units below Audi this month. Total retail sales including imports place BMW much closer with Mercedes at 56.945 (+14%), Audi at 48.177 (+7.2%) and BMW at 48.062 (+1.6%). Chinese carmakers with a smile on their face in June include Qoros (+678%), Brilliance (+101%), MG (+100%) thanks to the new 6 sedan, Changhe (+90%), Maxus (+69%), Hawtai (+58%) thanks to a new electrified lineup, Roewe (+52%), Yema (+40%), Landwind (+38%), Borgward (+28%), Hanteng (+22%) and BYD (+17%). Among foreigners, the most impressive are Jaguar (+65%), Citroen (+59%) thanks to the new C5 Aircross, Infiniti (+55%) thanks to a new QX50, Kia (+49%) also catching up on a dismal 2017, Volvo (+29%) and Mitsubishi (+16%).
Reversely, Jinbei (-78%), Bisu (-68%), Weichai (-66%), Cowin (-63%), Soueast (-62%), Haima (-57%), SWM (-46%), Lifan (-43%), Dongfeng (-39%), Leopaard (-38%), FAW (-25%), Karry (-25%), Wuling (-25%), JAC (-22%) and Haval (-20%) – hit full frontal by SUV disaffection, are the worst performing locals. Among foreigners, Fiat posts zero sale in June, Suzuki (-61%) has decided this month to pull out of the Chinese market, Ford (-55%) continues to freefall, while Denza (-54%), Acura (-40%), DS (-35%), Jeep (-34%), Mazda (-23%) and Peugeot (-19%) all implode.
Among new brands recently launched in market, Great Wall’s WEY (+241%) shows spectacular year-on-year gains but has been steadily declining month-on-month since March, hitting just 10.481 units in June with 3 models (VV5, VV7 and P8) which is only 49% of its all-time high of 21.349 hit last December. In contrast, its direct competitor, Geely’s Lynk & Co continues to progress, up 0.1% on May to a record 9.247 sales this month and still with only one nameplate, the 01, with the 02 and 03 slated for H2 2018. These two carmakers dominate recent launches in China head and shoulders, with the next best thing being Traum which seems to already have plateaued at 1.168 units (-4% on May). Next are Yudo (461), Xpeng (146) and June arrival COS (80), a new marque by Chana Oshan (more on this shortly in the June 2018 edition of our Focus on the All-new models series). EV makers Arcfox and Dearcc are both below 10 sales for the month.
Over in the models ranking, confirming the fall of grace of SUVs, the Top 5 best-sellers are all sedans officially for the first time since August 2013 when the Wuling Hongguang was still counted as a commercial vehicle. However, inserting the Hongguang – as it should be – into the PC sales ranking from its launch in 2011 leads to an even more impressive feat by sedans this month: the Top 5 best-selling passenger cars in China are 100% sedans for the first time in 6.5 years since January 2012. Leading the way is the VW Lavida (+26%) boosted by a new generation – and snapping the YTD lead off the Hongguang – ahead of the Nissan Sylphy (+32%) and Toyota Corolla (-0.4%) reproducing the May podium. The VW Santana (+81%) and Jetta (+14%) round up the Top 5, with Volkswagen even placing 5 nameplates in the Top 7 sedans: add the VW Sagitar (+3%) and Bora (+41%).
The Wuling Hongguang (-25%) skids down to #7 – its lowest-ever ranking – cannibalised by the new Baojun 360 up 37% on its inaugural month in May to record 11.002 units, all the while the Baojun 730 implodes at -70%. The Haval H6 sinks 25% to #6 but overtakes the Baojun 510 YTD, and the Geely Boyue (+4%) steps up to #2 best-selling SUV in China for the first time and one of only two inside the Top 10. For once, sedans monopolise the largest year-on-year gains in the Top 50 with best performers including the Hyundai Elantra Lingdong (+740%), Hyundai Celesta (+485%), BMW 5 Series L (+123%), Toyota Camry (+73%), Geely Emgrand GL (+68%), Hyundai Mistra (+68%), Chevrolet Cavalier (+63%), Chevrolet Sail (+60%), Honda Fit (+58%), Mercedes C-Class L (+47%), Audi A4L (+31%), Mercedes E-Class L (+29%), Geely Emgrand (+25%), Honda Accord (+15%) and Geely Emgrand GS (+13%). Only the Hyundai ix35 (+1263%) boosted by the new generation, Changan CS35 (+19%), Nissan X-Trail (+14%) and Buick Envision (+10%) shine among SUVs.
The 5-seat SUV Baojun 530 (#26) is the most popular recent launch (<12 months) but is already down 12% on May to just above 15.000 units. It is followed by the BYD Song MAX (#38), Baojun 360 (#50), Geely Vision X3 (#56), Lynk & Co 01 (#66), Geely Vision S1 (#86), GAC Trumpchi GS3 (#88), Haval H4 (#93) up to a record 6.114 sales and Kia KX Cross (#102). Among nameplates launched last month in May, the Baojun 360 is obviously the best performer at +37% to #50, followed by the FAW Senia R9 up 232% to #160, the Skoda Kamiq up 554% to #183, Jeep Grand Commander up 703% to #184, Changhe A6 up 31% to #215, BMW X3 up 3090% to #242, VW T-Roc up 25250% to #278 and WEY P8 up 13% to #319. The Changhe Q7 is the only May launch to see its sales drop vs. its inaugural month at -25% to #281.
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Full June 2018 Top 80 All China-made brands and Top 445 models below.