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A recovery in car sales is set to continue in China as government policies aimed at reviving demand following the coronavirus outbreak are gaining traction, an industry group predicted.

A recent quick rebound in demand suggests a V-shaped recovery has been established, China Passenger Car Association said in a statement on Monday. Yet some declines may still occur in the months ahead, the trade body said.

Car retail sales fell at a slower pace of 5.5% in April, following a 40% drop in March and a 79% plunge in February, PCA said. PCA’s report echoes that by China Association of Automobile Manufacturers last week, which showed the first monthly increase in wholesale deliveries since June 2018 and fueled expectations of a gradual revival from an unprecedented industry slump.

Optimism is growing that the world’s largest auto market is rebounding after China largely contained the coronavirus pandemic that shut down much of its economy. Sales have dropped for two years, and the virus worsened a slump kicked off by a slowing economy, trade tensions and stricter emission regulations.

With sales in many other major markets still in free-fall, a resumption of business in China offers a glimpse into possible customer trends in other countries as they emerge from lockdown. The China chief of Volkswagen AG, the market leader, said last week demand is recovering in the country as many first-time buyers look for new ways to get around while staying off buses and trains that could expose them to the coronavirus.

While making progress in containing the virus, Chinese authorities have introduced a slew of measures to prop up car sales, including tax breaks and subsidy extensions on electric vehicles, relaxing of emission rules, and financing help.

Sales of premium vehicles, a category that includes brands such as Audi, BMW, Lexus and Mercedes-Benz, rose 16% in April. Sales of mass-market vehicles made by joint ventures that companies such as Volkswagen and General Motors Co. have with local partners fell 5%. Chinese brands saw their sales drop 13%.

Sales of new-energy vehicles, including electric cars, fell 30% to 64,000 units in April, PCA said. That’s an improvement from a decline of 49% in March and 70% in February.

Tesla Inc.’s production in China topped 10,000 cars last month, according to PCA. The company has been adding customers in the country after starting local production around the start of the year. Yet Tesla has faced a fresh challenge in May, suspending output at its sole Chinese factory, people familiar with the matter have said.

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