Page 160 - 2020 White Paper on the Business Environment in China
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0 White Paper on the Business Environment in China
poor earnings. In the first half of 2019, China’s 2018 since the 1990s. That being said, NEV sales
automobile production and sales reached 12.13 jumped almost 62 percent in 2018 even as the
million and 12.32 million units, respectively, broader auto market contracted. NEVs include
down 13.7 percent and 12.4 percent year-on- plug-in hybrids, battery-only electric vehicles and
year. This was due to multiple factors, such as those powered by hydrogen fuel cells. China has
the slowdown of the macro economy, the early been a keen supporter of NEVs and has brought
implementation of China VI emission standards in sales quota requirements for automakers.
and the country’s auto market saturation. As for Due to the impact of subsidies cut on NEVs,
new energy vehicles (NEVs), production and sales however, sales for NEVs continued to drop. China
stood at 614,000 and 617,000 units respectively, Association of Automobile Manufacturers (CAAM)
an increase of 48.5 and 49.6 percent over the said it expected auto sales to fall 5 percent year-
same period from the previous year. Motoring on-year to 26.68 million vehicles in 2019. It
companies had a larger-than-expected decline still expects sales of NEVs to increase, but at a
in profits for the first half of the year, and many slower pace to 1.5 million, down from a previous
major players in the country witnessed losses forecast of 1.6 million. The implementation of
in both revenue and profit. SAIC Motor saw its new vehicle emission standards earlier than
revenue drop 19.05 percent to 376.29 billion yuan the central government’s 2020 deadline by 15
(US$52.4 billion), while net profits slumped 27.49 cities and provinces, which account for over 60
percent to 13.76 billion yuan, according to its percent of car sales in China, spooked buyers too
financial statements. Geely’s revenue decreased and hurt sales—particularly of traditional-fuel
11.4 percent year-on-year, and its net profit fell vehicles—according to CAAM, analysts, dealers
by 40 percent during the same period; Great Wall and consumers. The prolonged sales decline has
Motor’s revenue was reduced by 15 percent year- made local carmakers such as Geely Automobile
on-year, while its net profits had a drop of 58.95 Holdings Ltd and Great Wall Motor Co Ltd cut
percent during the same period. For carmakers expectations for sales and profit. The decline
that posted a loss, Changan Automobile suffered has also prompted some global names including
the largest deficit—2.2 billion yuan, due to the Peugeot SA to close plants and adjust workforce.
sales decline of Changan Ford and Changan China is also re-instituting an additional 25
Mazda. On the other hand, only two firms—BYD percent tariff on US-made vehicles and 5 percent
and BAIC’s new energy arm, BJEV—gained in tariffs on auto parts that had been suspended
revenue and net profit in the first half of the year at the beginning of the year. Carmakers such
among the 17 listed passenger car companies. as Daimler AG and Tesla Inc had adjusted their
The two also ranked first and second for sales prices in China when the auto and auto parts
volume in China’s NEVs market. The sales volume tariffs were suspended (Sun).
of NEVs is expected to exceed 1.5 million units in
China in 2019, which is becoming a new driving
force for the auto industry despite the country’s In the auto industry temporary slowdowns can
subsidy withdrawal in June (Wang, Speed Bump). be offset with seasonal plant shutdowns, especially
in the summer, but an extended depression would
Total auto sales fell 6.9 percent in August lead to plant closings, not idlings. Weaker players
2019 from the same month a year earlier to 1.96 are always the first to feel it—Peugeot and Fiat
million. Industry insiders claim that perhaps the have essentially ended Chinese production in 2019
next three years will be at a low or small negative (although Fiat is keeping the Jeep brand)—but
growth. Sales will pick up, but they don’t know ultimately even the strong, local players would have
when. The key reason for the poor outlook was to lower capacity. This would have a devastating
low consumer confidence amid an economic impact on the overall Chinese economy owing to
slowdown and trade tensions with the United the auto industry’s multifaceted impact on virtually
States. As recently as three years ago automakers every sector of the consumer and industrial
had enjoyed double digit annual growth in the economy (Collins).
world’s largest auto market, before the brakes
came on with the first annual contraction in
160
poor earnings. In the first half of 2019, China’s 2018 since the 1990s. That being said, NEV sales
automobile production and sales reached 12.13 jumped almost 62 percent in 2018 even as the
million and 12.32 million units, respectively, broader auto market contracted. NEVs include
down 13.7 percent and 12.4 percent year-on- plug-in hybrids, battery-only electric vehicles and
year. This was due to multiple factors, such as those powered by hydrogen fuel cells. China has
the slowdown of the macro economy, the early been a keen supporter of NEVs and has brought
implementation of China VI emission standards in sales quota requirements for automakers.
and the country’s auto market saturation. As for Due to the impact of subsidies cut on NEVs,
new energy vehicles (NEVs), production and sales however, sales for NEVs continued to drop. China
stood at 614,000 and 617,000 units respectively, Association of Automobile Manufacturers (CAAM)
an increase of 48.5 and 49.6 percent over the said it expected auto sales to fall 5 percent year-
same period from the previous year. Motoring on-year to 26.68 million vehicles in 2019. It
companies had a larger-than-expected decline still expects sales of NEVs to increase, but at a
in profits for the first half of the year, and many slower pace to 1.5 million, down from a previous
major players in the country witnessed losses forecast of 1.6 million. The implementation of
in both revenue and profit. SAIC Motor saw its new vehicle emission standards earlier than
revenue drop 19.05 percent to 376.29 billion yuan the central government’s 2020 deadline by 15
(US$52.4 billion), while net profits slumped 27.49 cities and provinces, which account for over 60
percent to 13.76 billion yuan, according to its percent of car sales in China, spooked buyers too
financial statements. Geely’s revenue decreased and hurt sales—particularly of traditional-fuel
11.4 percent year-on-year, and its net profit fell vehicles—according to CAAM, analysts, dealers
by 40 percent during the same period; Great Wall and consumers. The prolonged sales decline has
Motor’s revenue was reduced by 15 percent year- made local carmakers such as Geely Automobile
on-year, while its net profits had a drop of 58.95 Holdings Ltd and Great Wall Motor Co Ltd cut
percent during the same period. For carmakers expectations for sales and profit. The decline
that posted a loss, Changan Automobile suffered has also prompted some global names including
the largest deficit—2.2 billion yuan, due to the Peugeot SA to close plants and adjust workforce.
sales decline of Changan Ford and Changan China is also re-instituting an additional 25
Mazda. On the other hand, only two firms—BYD percent tariff on US-made vehicles and 5 percent
and BAIC’s new energy arm, BJEV—gained in tariffs on auto parts that had been suspended
revenue and net profit in the first half of the year at the beginning of the year. Carmakers such
among the 17 listed passenger car companies. as Daimler AG and Tesla Inc had adjusted their
The two also ranked first and second for sales prices in China when the auto and auto parts
volume in China’s NEVs market. The sales volume tariffs were suspended (Sun).
of NEVs is expected to exceed 1.5 million units in
China in 2019, which is becoming a new driving
force for the auto industry despite the country’s In the auto industry temporary slowdowns can
subsidy withdrawal in June (Wang, Speed Bump). be offset with seasonal plant shutdowns, especially
in the summer, but an extended depression would
Total auto sales fell 6.9 percent in August lead to plant closings, not idlings. Weaker players
2019 from the same month a year earlier to 1.96 are always the first to feel it—Peugeot and Fiat
million. Industry insiders claim that perhaps the have essentially ended Chinese production in 2019
next three years will be at a low or small negative (although Fiat is keeping the Jeep brand)—but
growth. Sales will pick up, but they don’t know ultimately even the strong, local players would have
when. The key reason for the poor outlook was to lower capacity. This would have a devastating
low consumer confidence amid an economic impact on the overall Chinese economy owing to
slowdown and trade tensions with the United the auto industry’s multifaceted impact on virtually
States. As recently as three years ago automakers every sector of the consumer and industrial
had enjoyed double digit annual growth in the economy (Collins).
world’s largest auto market, before the brakes
came on with the first annual contraction in
160
