Domestic producers perform well amidst slowing growth of SUV market

China's sport-utility vehicle market is expected to post slower growth this year, according to estimations of the China Association of Automobile Manufacturers.

China's sales of sport-utility vehicles are expected to reach 11 million this year, up 20 percent year-on-year, according to the China Association of Automobile Manufacturers. This growth is a sharp slowdown from the 44 percent growth of the SUV sector last year. 

"2017 will become a starting point for the slowing growth of sport-utility vehicles," said Xu Changming, director of the Information Resource Department at the State Information Center. "Only companies with competitive SUV models can win market share."

Sales of sport-utility vehicles grew 16.8 percent to 4.53 million units in the first half of this year, data from the China Association of Automobile Manufacturers showed. The growth rate is below the association's prediction of 20 percent growth this year.

Domestic makers perform well in SUV sector

While the growth of sport-utility vehicles is slowing, domestic makers saw a rise in market share.

"Domestic manufacturers have contributed a lot to the growth of the SUV sector in the first half of this year," said Shi Jianhua, deputy secretary-general of the China Association of Automobile Manufacturers. 

The market share of domestic vehicle makers accounted for 59.6 percent of the total SUV sector in the first six months, 3.6 percentage points higher compared with the same period last year, data from the China Association of Automobile Manufacturers showed.

This development in the domestic vehicle sector is down to cost control measures and the introduction of new models into the market, Shi said.

"Domestic brands are still leading in market share and have the potential for further growth," said Zhang Zhiyong, an independent auto analyst.

Zhang also said the competition between domestic makers could lead to further brand polarization. "Brands like Geely and Great Wall will continue to perform well, while some other brands may fall behind or even be eliminated from the market."

SUV market share continues to grow

While the growth rate has slowed down, the market share of sport-utility vehicles is climbing, which means more and more people are choosing these vehicles instead of buying a sedan or multi-purpose vehicle.

Market share of SUVs rose to 40.2 percent in the first half of this year, up from 16.7 percent of market share in 2013, according to data from the China Association of Automobile Manufacturers.

The rise is driven by growing demand from young and middle age buyers in third and fourth-tier cities in China, Shi said. 

"We can observe that young consumers as well as middle age car buyers are in favor of buying sport-utility vehicles. People who have sedans as their first car tend to choose a sport-utility vehicle as a second vehicle," Shi said.

"The market share of sport-utility vehicles is expected to exceed the market share of sedans this year," Shi added. "It will be a first, different from the situation of the past few years."