China September 2018: Sedans trigger third consecutive market decline

The Nissan Sylphy is the only Top 10 model in positive in September.

* See the Top 80 All China-made brands and Top 450 models by clicking on the title *

Wholesales seem to now be stuck in a downward spiral in China: September deliveries plunge 11.5% to 2.394.100 units, the second double-digit gain in 2018 after the last February (-11.6%). This steep drop logically echoes August retail sales down 10.1% as dealers adjust their commands to lower demand. Following -5.3% in July and -3.8% in August, this is the third consecutive year-on-year decline, a situation we haven’t seen since August 2015. At the time, the Chinese government halved the purchase tax on vehicles of 1.6L and less with instantaneous and spectacular results: double-digit gains from October to December 2015. The China Automobile Dealers Association in fact has started lobbying finance and commerce ministries in China last month, suggesting similar measures to salvage sales given the purchase tax was raised back up to 10% last January. In the segment detail, the main September news is sedans now joining SUVs in their freefall. Indeed sedans are down 13.4% to 1.005.000 units, SUVs down 10.1% to 872.800, MPVs down 11.4% to 147.000 and microvans down 21.9% to 34.900 leading to a light vehicle score down 12% to 2.060.500. Commercial vehicles slip 8.4% to 533.600 units to reduce the overall market decline slightly to -11.5%.

The Wuling Hongguang is back on the podium thanks to its facelift.

Year-to-date levels remain at record high for now at +1.5% to 20.409.000, with sedans up 1.3% to 8.426.900, SUVs up 3.9% to 7.235.500, MPVs down 13.1% to 1.261.400, microvans down 19.6% to 337.100 leading to light vehicles as a whole up 0.6% to 17.259.700 and commercial vehicles up 6.3% to 3.230.900. Yet what started as a sudden, surprising and historical plateauing of SUV sales last June (-0.5%) has now spread to every corner of the Chinese market in a worrying trend. In fact, Nomura Securities expect Q4 sales to drop 7.5% leading to an annual result for 2018 at -1.6% to 28.4 million which would be the first market decline since 1990. To keep things in perspective, we are still looking at an astounding 27 years of uninterrupted growth leading China from a non-existent car market then to the largest in the world by an unsurmountable margin now, and the 2nd largest annual volume reached by any nation in the world in the history of automobile. But it is the first time an annual decline is even talked about in China. How did we get to this?

Volkswagen (-16%) is planning to reverse its fortunes with a slew of new SUVs such as the Tayron.

We have already related the main reason behind faltering sales: a government crackdown on P2P digital lending platforms that led to roughly 10-15% of potential new vehicle buyers – mostly younger – being kept away from the market. Logically, the direct negative sales impact was first felt by Chinese SUVs, by far the most attractive to this segment for the younger  population hit by the lending crackdown due to low prices but hip status. More on the P2P lending impact on the 2018 Chinese car market here. This negative trend is now spreading to all segments in the market, which also worryingly means all layers of the population, helped by a 25% fall of the Shanghai stock market since the start of the year and a possible gradual loss of confidence in future economic climate triggered by the trade war with the U.S., although at BSCB we feel these latter two elements have had a much smaller impact on the recent evolution of the Chinese market.

The new X3 helps BMW up 25% in China this month.

In the China-made brands ranking, Volkswagen (-16%) posts the steepest decline in the Top 7 and its first double-digit drop since February 2016, an evolution we predicted due to depressed retail sales down for the past 4 months and at -10% in August. The German carmaker is now aggressively trying to prop up sales with a slew of new SUVs: after the T-Roc last June, the China-exclusive Tayron and Tharu make their first appearance in the Chinese charts this month, an arrival we cover in detail in our September 2018 Focus on the All-new models. Despite the sudden U-turn SUV sales have endured over the past few months, this is a valid strategy as foreign SUVs have mostly been unscathed to-date. Honda (+5%), Toyota (+12%) and Nissan (+2%) on the other hand all post market-defying positive results and knock Geely (+1%), ending 29 consecutive months of double-digit gains, to #5, its lowest ranking since September 2017. Geely remains the #2 brand YTD at 1.05 million wholesales.

Yema sales jump 85% year-on-year in September.

Below Buick (-8%) and Hyundai (-6%), Baojun (+21%), Changan (-23%) and Haval (-21%) round up the Top 10 but are in great difficulty due to their reliance on the embattled Chinese SUV segment. For example, the Baojun 510 (-31%) is back up 12 spots on August to #8 but has lost more than 30% year-on-year during each of the past 4 months, the Changan CS75 (-48%) has plunged at least 44% over the same period despite a facelift and the Haval H6 (-21%), still the #1 SUV in the country, has endured double-digit drops for 10 of the past 13 months. Among foreigners carmakers, only premium brands fare well thanks mostly to growing China-made lineups: Infiniti (+26%), BMW (+25%), Cadillac (+25%), Mercedes (+17%), Audi (+3%) and Volvo (+2%) all score positive results. In fact overall sales (including imports) show BMW above Mercedes for the first time this year. In the Chinese aisle, Qoros (+462%), MG (+85%), Yema (+85%), Hawtai (+43%), BYD (+38%), Cowin (+25%), SWM (+16%) and Chery (+10%) are among the most dynamic.

The new brand Jetour makes its appearance in Chinese charts this month.

Among brands launched over the past 12 months, Lynk & Co remains the standalone leader thanks to a 7th consecutive record volume. Up to almost 15.000 units thanks to just two nameplates – the 01 at 9.301 and the 02 at 5.556, this is 50% higher than established brands such as Mitsubishi or Geely-stablemate Volvo. Even more significantly, Lynk & Co outsells its Great Wall archenemy, WEY (-12%) for the third straight month, with both its nameplates now above the entire WEY lineup (VV5, VV6, VV7 and P8 all below 4.100 units). Two very significant new brands appear this month: Chery’s Jetour with almost 8.000 sales and Great Wall’s EV marque Ora at 700. Both Traum (2.714) and Yudo (1.050) also break volume records. However its bad news for Bisu (-79%), Landwind (-75%), Lifan (-69%), Changhe (-62%), Zotye (-62%), Karry (-61%), Leopaard (-55%), Haima (-54%), Beijing Auto (-50%), FAW (-42%) and Dongfeng (-40%), while among foreigners Suzuki (-73%), Peugeot (-63%), Renault (-61%), Ford (-60%), Land Rover (-52%), Jeep (-46%), Citroen (-45%), Acura (-43%) and DS (-37%) are hit the hardest.

The Camry (+153%) helps Toyota up 12% in China in September.

Model-wise, the VW Lavida (-19%) cements its YTD leadership with a 6th consecutive pole position despite a worrying gain given the new generation is only starting its career. The Nissan Sylphy (+8%), whose electric variant has now arrived (314 sales in September), is the only Top 10 nameplate to post a year-on-year gain, here too cementing its #2 YTD ranking. Yet, illustrating their fall from grace, sedans loosen their recent grip on the ranking with “only 5 in the Top 7, the Buick Excelle GT (-17%), VW Jetta (-15%) and Santana (-4%). The Wuling Hongguang (-6%) now helped with a new generation pictured above, posts its first podium and slimmest drop since last March while the Haval H6 (-21%) returns to the #4 spot it holds YTD. The largest gains in the Top 50, in the past few months a sedan exclusive, sees a slightly more balanced scorecard this month, with the most dynamic being the Hyundai ix35 (+288%), Toyota Camry (+153%), Hyundai Elantra Lingdong (+67%), Chevrolet Sail (+59%), Nissan Qashqai (+57%), Honda Fit (+42%), XR-V (+35%), Civic (+30%), Nissan X-Trail (+28%), Mercedes E-Class L (+27%) and Honda Accord (+25%).

The Baojun 360 remains by far the most successful launch of the past 12 months.

Recent launches are once again dominated by the Baojun 360, up 23% on August to a new record 18.943, ahead of the VW T-Roc (#67), Lynk & Co 01 (#69), Baojun 530 (#71) down 21% on last month, Jetour X70 (#83) covered in our Focus on All-new models, Skoda Kamiq (#87), the brand’s best-seller for the first time at a record 7.341, Chery Tiggo 8 (#88), Toyota C-HR (#101), BMW X3 (#103), Lynk & Co 02 (#105) and Brilliance V6 (#115), all breaking new volume records. Other record-breakers in September include the BYD Tang (10.435) up 10-fold on the previous generation in September 2017, the GAC Trumpchi GS3 (9.637) continuing a steady year-long progression and the Hongqi H5 (2.974). As for nameplates launched in August, the WEY VV6 is up 189% and 86 spots to #175, the MG HS is up 328% and 87 ranks to #267, the YGM E-Series up 1097% and 108 spots to #298 and the Roewe MARVEL X up 1279% and 38 ranks to #390 but the Traum SEEK 5 is down 23% and 38 spots to #318 and the Jaguar E-Pace down 36% and 53 spots to #332.

Previous month: China August 2018: P2P lending crackdown triggers 2nd decline in a row

One year ago: China September 2017: SUVs post smaller gain, VW Lavida now #1 YTD

Full September 2018 Top 80 All China-made brands and Top 450 models below.