Auto industry 'on track to recover,' experts say
China's automotive industry is on track to recover from the impact of the pandemic and production is likely to accelerate from June, driven by stronger-than-expected stimulus packages, experts say.
Despite COVID-19, the passenger vehicle market in the world's second-largest economy is likely to resume a 4-6 percent growth rate this year, said Yang Jing, director of China Corporate Research at Fitch Ratings, during a recent webinar.
Strong consumer stimulus policies from both central and local governments to boost consumption, coupled with automakers' and dealers' strong incentives for buyers, will help buoy consumer confidence.
Fitch expects electric vehicles to remain a key driver of growth for China's passenger-vehicle market, contributing over one-fifth of sales volume in 2022.
Plug-in hybrids, high-end electric vehicles and smart electronic cars will outperform.
Despite the strong order backlogs to support deliveries in the first half of 2022, supply-chain challenges will persist, Yang said.
Chip shortages may continue to bother automakers and electric vehicle battery costs are forecast to further increase in the third quarter.
"In response, automakers may adjust their supply-chain strategies for stable and diversified components supplies," she said.
In a move to boost auto sales, authorities halved the purchase tax for small-engine cars from 10 percent to 5 percent of the sticker price from June 1, which will be carried through the end of the year.
Xin Guobin, vice minister of industry and information technology, told a recent press conference that the ministry is working with relevant departments to study whether to continue the tax cut.
Lu Zhengwei, chief economist at China Industrial Bank, said at its recent interim strategy conference that there will be a K-shaped recovery in consumption after the recent resurgence of the pandemic – but auto sales will have "a bright performance."
The annual sales volume of new-energy vehicles will hit 5 million this year, bringing the penetration rate to around 18.9 percent, estimates Li Tenghui, an auto analyst at CIB Research.
Global sales of electronic vehicles maintained strong momentum in the first four months, with China accounting for over half the global total.
China's auto industry has recovered significantly from the difficulties of April when widespread public-health restrictions and lockdowns took a toll on key auto manufacturing bases.
Wholesale and retail deliveries rebounded sharply by 67 percent and 29 percent month on month in May, translating into narrower year-on-year declines of 2 percent and 17 percent, data from China's Passenger Car Association showed.