The Coronavirus outbreak has brought the Chinese market to its knees.
In line with our expectations earlier in the month, as a result of the country effectively shutting down in February, wholesales of China-made light vehicles drop -79.1% year-on-year this month to 310.000 units. Passenger Vehicles are down -81.7% to 224.000 with Commercial Vehicles slightly less affected at -67.1% to 86.000. Within Passenger Vehicles, SUVs resist best once again at -78.8% to 112.000 and outsell Cars for the 2nd consecutive month – and ever, the latter being down -83.9% to 94.000. MPVs sink -83.7% to 14.000 and minibuses are down -84.4% to 3.000. After a month of January hit by the Lunar New Year holiday (-18.4%), the Chinese wholesales year-to-date volume is now down -42% to 2.238.000 units including 1.831.000 Passenger Vehicles (-43.6%) and 407.000 Commercials (-33.2%). SUV sales cement their lead at -37.3% to 883.000 vs. 834.000 cars (-47%), 90.000 MPVs (-58.6%) and 24.000 minibus (-49.7%). New Energy Vehicle (NEV) sales are down -75.2% to 13.000 or 4.2% share vs. 2.3% in January and 4.7% over the FY2019. For perspective, the February 2020 volume equals less than a week’s worth of February 2019 sales and returns the Chinese wholesales market to levels unseen since 2002 – albeit artificially and temporarily.
How are the next few months looking?
According to China Auto Review as of March 11 (the day Wuhan plants are allowed to resume activity), 90.1% of the 203 vehicle manufacturing facilities under 23 Chinese automobile groups have resumed production, with 77% of their employees having returned to work. CADA says the work resumption rate of dealerships is at 54.48% as of March 13 based on a survey of 8.371 dealerships around the country. According to estimates from the China Passenger Car Association (CPCA) published today March 19, retail sales in China will drop -41% to 1.03 million units in March, with a turnaround in sales not expected until April or May and potential positive year-on-year result over H2. The first week of March saw retail sales drop -54% year-on-year to 127.000 and CPCA expects week 2 to be down -43% (166.000), week 3 at -38% (187.000) and week 4 at -30% (550.000) for a full month at -41% (1.03m). Production remains in doldrums for now at -78% over the first week of March, which could point to supply difficulties for dealerships towards the end of the month and lower final wholesales volumes a little further.
Wuhan street in lockdown.
Will we ever get back to “normal”?
Yesterday (March 18) marked first day since the start of the pandemic that no new locally transmitted Coronavirus cases were recorded in China, a very strong signal that the pandemic is now under control at the location where it started. However the virus is now spreading out of control outside the country, totalling almost 140.000 vs. 81.000 in China, with 17.700 new cases reported on March 18, the 2nd-largest daily figure thus far. It is now widely accepted by global economic analysts – me among them – that the Coronavirus crisis is so shocking and severe that some of our societal behaviours may not ever return to how they were before the pandemic. According to some of our contacts in China, there are signs that even now that the epidemic has been contained there, people remain wary of public transport and instead are opting for the security of their own private car which, if confirmed as a widespread attitude, could actually help the Chinese new car market in the mid to long term.
Geely is the #1 brand in China in February. It aggressively pushed anti-Coronavirus air filtration tech, notably on the new Icon SUV (pictured).
Chinese brands drastically improve they market share of Passenger Vehicles to 52.6% vs. 42.9% in February 2019 thanks to sales down “only” -77.4% to 117.800. This is to be compared with foreign carmakers down an abysmal -84.8% to just 106.200 units and 47.4% share vs. 57.1% in February 2019. This is allegedly linked to a faster return to work vs. foreign carmakers whose leadership teams were often evacuated back to their home country. The better performance of Chinese brands is reflected in this month’s brands ranking, even though in these exceptional circumstances reasonable sales aren’t necessarily the result of a greater commercial performance, rather the luck of being stronger in areas that did not have to go into complete lockdown and possibly the preparedness and safety measures quickly initiated in local factories. It is notably the case for Geely (-75.3%) spectacularly taking the overall brands lead in February which means Volkswagen (-90.2%) isn’t the most popular carmaker in China for the first time since its arrival in the country back in 1991. Geely has been quicker than most to resume factory activity but perhaps more significantly has been advertising new anti-bacterial air filter tech that supposedly prevents the Coronavirus from entering the cockpit of its cars. This ideally positions the brand for success over the next few months, even though this tech’s efficacy in the specific case of the Coronavirus isn’t 100% proven as far as we know.
Chery and Jetour marketing has focused on anti-Coronavirus air filters ever since the start of the outbreak.
Below Nissan (-73.2%) and Changan (-75.2%), Chery (-37.2%) is the other “winner” this month, surging 13 spots on January to rank #5 overall, and is alongside its stablemate Jetour (-47.2%) the only Top 35 carmaker to lose less than half its volume year-on-year in February. Similarly to Geely, the good performance of both brands this month can also potentially be linked to aggressive advertising of its existing antibacterial air filtration technology, notably on WeChat, which has helped build the perception that Chery Group cars are better equipped against the Coronavirus. Newcomer Jetta (5.217) surges 9 spots on last month to a record 15th place and, even with drastically reduced volumes, holds onto its title of most successful launch in Chinese history with 71.873 wholesales in 6 months vs. 57.166 for previous record-holder Jetour. As for Tesla (3.900), it spectacularly lands directly at #20 but as we described in our February new models update, in typical Elon Musk fashion these are in fact likely to be January deliveries as the carmaker’s factory was shut most of February.
The Telsa Model 3 lands at #4.
The next best performers near the top are Jinbei (-56.2%), Hongqi (-60.8%), JAC (-61%), Ford (-61.1%), MG (-62.7%) and Mercedes (-69.3%), all other brands losing over 70% year-on-year. A handful of tiny NEV makers actually post a gain this month, but Denza (+2100%), Weltmeister (+36%) and NIO (+8.1%) all account for less than 0.25% market share. In contrast and as is to be expected, carmakers whose factories and/or parts manufacturing are predominately located in Wuhan and the surrounding Hubei province are completely annihilated this month. This is the case for Cadillac (-98.6%), Renault (-98.4%), Venucia (-93.4%), Buick (-92.4%), Honda (-90.4%), Peugeot (-89.2%), Citroen (-88.5%), Chevrolet (-88.4%), but also and unrelated to Wuhan activity JMC (-99.1%), Jaguar (-98.8%), Land Rover (-98.7%), Hyundai (-95.7%), Mitsubishi (-94.9%) and Volvo (-94.8%) are all hit particularly hard. Strikingly, even though it is headquartered in Wuhan, Dongfeng (-77.7%) resists relatively well – better than the market at least – potentially thanks to its multitude of subsidiaries peppered all around the country.
The Nissan Sylphy is the best-selling vehicle in China in February.
Looking at the models ranking offers a surreal perspective this month with the country’s best-seller, the Nissan Sylphy (-72.7%) only needing 6.520 units to top the overall charts, while its archenemy the VW Lavida (-90.4%) is down to #12. The Haval H6 (-80.3%) lifts 3 spots on January to #2 with the VW Bora (-73.1%) rounding out a relatively familiar podium. The Tesla Model 3 lands directly – and mostly artificially as described above – in 4th place, distancing the Changan CS75 (-65.8%). The Chery Arrizo GX (-1.3%) is up 58 ranks on last month to #6, the Mercedes GLC (-60.7%) is up 21 to #7 and the Chery Tiggo 5x (+263.6%) up 77 to #9, all aforementioned nameplates smashing their ranking records in extraordinary circumstances. The Chery Tiggo 3 (+25.8%) and MG HS (+16.1%) are the only other Top 100 models in positive, just as the Jetta VS5 (#16), BYD Song Pro (#42), Jetta VS7 (#43) and GAC Aion S (#50) shine among recent launches (<12 months).
Full February 2020 Top 93 All China-made brands and Top 452 All models below.