I. Review of the National Passenger Vehicle Market in March - Retail

In March, the retail sales of passenger vehicles reached 1.045 million units, a year-on-year decrease of 40.4%. Compared with the -78.7% year-on-year decline in February, it rose by 38 percentage points, showing a good trend of V-shaped recovery at the bottom. The retail sales growth rate in March was 300% compared with that in February, the strongest recently, reflecting the relatively rapid recovery of essential consumption after the epidemic. From January to March 2020, the cumulative retail sales of passenger vehicles in the national market reached 3.014 million units, with a year-on-year cumulative decline of 40.8%. This was mainly due to the dual impact of the earlier timing of the Spring Festival and the negative external environment brought about by the outbreak of the novel coronavirus in China, resulting in a cumulative monthly sales loss of 2.09 million units.

With the easing of the domestic epidemic situation and the accelerated pace of resumption of work and production in various regions, over 90% of dealerships across the country resumed operations in March. However, dealerships prioritized the recovery of after-sales business, while terminal retail gradually recovered slowly. New car sales mainly relied on online sales to accumulate orders.

In March, the retail performance of major manufacturers fluctuated compared with the previous rankings. The luxury car market was generally strong, while domestic manufacturers such as Geely, Wuling, and Changan had strong retail performance. This was mainly due to the fact that the demand for car purchases was mainly for basic needs, which drove high cost-performance models to perform well. There are several reasons. First, the demand for car purchases in March was mainly rigid, driving up the demand for high cost-performance models and high-end trade-ins. Secondly, each brand has its own focus in regional markets. The recovery of the consumer market is related to the decline in the level of the epidemic, which has facilitated the rapid recovery of some regional leading brands. Thirdly, it is related to the inventory levels of various brand dealers during the epidemic. Due to the slow recovery of production and logistics, some essential and urgent orders were lost as some brand terminals did not have available vehicles.

The frequent release of policies has also brought fluctuations to the sales market. Due to the fact that some regions have promoted the introduction of car sales policies, but the implementation details remain unclear, coupled with expectations for the national consumption promotion policies, consumers' wait-and-see attitude has also been reflected, and the retail growth at the end of the month has slowed down somewhat.

Ii. Outlook for the National Passenger Vehicle Market in April

April has 22 working days, one more than the same period last year. Although the overseas epidemic situation is still worsening, some authorities predict that the overall international situation will reach a turning point at the end of April. With the transformation of the situation abroad and the domestic epidemic situation gradually overcoming various risks and stabilizing, the consumer market will still mainly recover positively and steadily.

Third, the survival pressure on automakers is increasing

The automotive industry is characterized by economies of scale. The huge production capacity leads to relatively rigid fixed costs, and a certain sales volume is needed to maintain balance. With the decline in car sales over the past two years, the profits of the automotive industry have also been continuously decreasing. In 2019, the profit of the automotive industry was 508.7 billion yuan, a year-on-year decrease of 15.9%, with a sales profit margin of 6.3%. The annual sales profit was 1 percentage point lower than that of 2018. Moreover, in January-February this year, the profit of the automotive industry was 10 billion yuan, a decline of 79.6%, far lower than the average decline of 38.3% for industrial enterprises. The sales profit margin also dropped to a historical low of 1.3.

The benefits of extending the tax exemption for new energy subsidies for two years are huge

To boost car consumption, the executive meeting of The State Council has determined that the purchase subsidy and tax exemption policies for new energy vehicles will be extended for two years. China's new energy vehicle industry is currently at a critical juncture of "climbing over the hump". Coupled with the impact of the pandemic and the global decline in oil prices, the downward pressure on the market has increased. Therefore, the value of this policy is extremely huge and will bring significant and far-reaching promoting significance to the development of China's new energy vehicles.

V. The value-added tax on used cars has been reduced to 0.5%, which is beneficial to the development of the industry

The executive meeting of The State Council has decided to reduce the value-added tax on second-hand vehicles to 0.5%, which is beneficial to the standardized development of the industry.

Six. A package of policies is needed to boost auto consumption

Since 2018, the Central Committee of the Communist Party of China and The State Council have introduced a series of policies and measures to stabilize auto consumption and promote optimization and upgrading. Since 2018, the trend of the auto market has not been significantly driven by policies, and this is not an issue of overdraw effect. Recently, the purchasing power of car consumption has been relatively sluggish due to environmental influences, and there is still room for improvement in the promotional fee policies of the car market.

Aluminum Wheels, Issue 4, 2020