China has been central to auto sales growth for the last 30 years but things have only gotten tougher for this market. Even before COVID-19 wreaked havoc from Wuhan, China was experiencing a decline in car customer demand, numerous tariff hardships, along with adapting to stricter emission standards.
China’s Auto Sales Downturns
Back in 2009, China’s auto sales overshadowed that of the U.S. due to the growth of its middle class. The widespread growth of the middle class bolstered the demand for cars and inspired local and foreign automobile manufacturers to band together to assemble more facilities. In 2019, 260 million cars belonged to Chinese citizens.
The China Association of Automobile Manufacturers reported that China’s auto sales, in general, declined for the second consecutive year in 2019 with an 8.2% decrease in sales from 2018. Auto sales in China really started to slump in July of 2018 after the nation’s new goal of electric vehicles making up 60% of car buying by 2035.
The rising cost of living in China is also a factor that has contributed to the decline in auto sales
Unsurprisingly, COVID-19 has derailed economic forecasts and the nation’s overall goal of increasing electric vehicle production. Although, electric car sales in China are now showing signs of improvement.
Signs of Hope
The lights are slowly starting to come back on in China. Businesses are reopening, people are even gathering with loved ones again at local restaurants. These positive signs are extending to the auto industry as well.
Recently, Tesla exceeded expectations by delivering over 88K vehicles in Q1 and by the success of its Gigafactory Shanghai. The car company sold 10,160 vehicles in March, a significant jump from 2,620 vehicles sold in January and 3,960 sold in February. Tesla’s March sales represent 30% of the EV market in China. Outside of Tesla’s impressive sales, the rest of the EV sales have been still been declining, but at a slower rate as of March, which is another reason to feel optimistic.
Even though 2020 has been extremely challenging, auto industry experts are expecting sales to pick up again later this year.
Carmakers Ready to Ride Out the Storm in China
Toyota, General Motors, Ford, and Volkswagen are among the top car manufacturers who have already reopened for business in China. The carmakers have their work cut out for them but dealerships are drawing in visitors and increases in vehicle sales are starting to follow. This is particularly good news for carmakers considering the vast COVID-19 outbreaks in the U.S., Europe, Latin America, and now India.
Shanghai BMW, in particular, is seeing a boost in orders in China which is another sign of economic improvement. Tesla is also ready to improve upon its sales in Q1 by increasing its production at its Gigafactory Shanghai. Volkswagen is adjusting to its new normal and sill plans on moving forward with the construction of two brand new electric vehicle plants for later this year. Honda, Fiat Chrysler, and Nissan are also among the car companies ready to restart productions as China continues to recover.