CHINA TOPIX

Updated 11:29 AM EDT, Tue, Jun 16, 2020

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China Has Increasing Needs For Automobiles

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(Photo : Image by Free-Photos from Pixabay )

Image by Free-Photos from Pixabay

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Despite the adverse effects of the pandemic to China's economy, market demand for automobiles increase in the country. More consumers opted for Tesla Model 3 as sales for the product continue to shoot up policies to promote a healthier automobile industry is expected from the National Congress.

China is currently emerging as the most recovering country since the pandemic as market demand for automobiles in the country starts to grow. The auto demand stimulus was linked to industry expectations on policies to be imposed by the National Congress for prolonged production measures in major global manufacturing centers.

Last March, auto sales in China totaled 1.05mm units as the country gradually recovers from the adverse effects of the pandemic to its economy. The pace of decreases in demand since February slowed due to the extension of the Chinese government support for electric vehicle subsidies and imposing measures to promote auto demand. The measures included Beijing's initiative to trade in older automobiles. In 2019, the total volume of automobile industry sales in China reached 25 million units in 2019 where 21 million of which were passenger cars.

Sales fell to about 56,000 units in China last March while the related share of the country's overall automobile market fell by 5.3 percent. However, sales of the Tesla Model 3 vehicle continued to improve when 10,160 units were sold in March. Despite the uncertainties brought about by the crisis to the automobile market, investors feel confident that long-term growth is steaming in through China's electric vehicle market.

The two-year extension to the subsidy and the start of full-scale operations at Tesla's Shanghai plant and a NEV credit quota upgrade were among the economic indicators that triggered hope for industry players.

Also, in March, Hyundai Motor Co. and Kia Motors sold 35,000 and 13,537 units in China, respectively. Their ex-factory sales amounted to 30,838 units and 16,946 units, respectively. They have also resumed active promotional activities in the country including the launch of new car exchange offers and diverse customer care programs. Such programs included unemployment protection plans applicable to workers in their Chinese facilities.

As China gradually emerges from the pandemic shock, auto stocks in the global market also start to rebound. There were signs of easing concerns towards the financial markets despite the prolonged period of discontinued production in major global manufacturing areas outside of China. These included countries where auto companies assemble and/or manufacture their auto parts such as the US and Europe.

The global auto industry also continues to suffer from disrupted supply chain uncertainties caused by national lockdowns all over the world. However, in China, most factories of automobile industry players have resumed their normal business activity including Tesla.

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