Looking back on 2020, the year when the epidemic first came, many people thought it was the darkest year. Never thought that 2020 might be the “best” year of the past two years.
Two years have passed, the fog of the epidemic has not completely dissipated, and the contradictions of chip shortage and insufficient supply of components have continued to escalate. In addition to the blow on the supply side, the performance of the market demand side also showed weakness. In April this year, the growth rate of domestic passenger cars was almost “halved”…
Soon, news came out that in order to boost car consumption, “cars to the countryside” will be implemented in the second half of this year. Although the news was refuted by the China Association of Automobile Manufacturers, the call for a policy to save the market has been getting louder recently. Until May 23, at the executive meeting of the State Council, it was proposed to reduce the purchase tax of some passenger cars by 60 billion yuan in stages.
In addition, we have seen that many local governments are also launching auto consumption stimulus policies to boost the market as much as possible in the form of car purchase subsidies.
However, whether it is a national subsidy or a local subsidy policy, can it really be a good remedy for the current bailout? How beneficial will it be for solving current industry problems? Although there have been relatively successful precedents for the introduction of consumption policies at the national level to stimulate the automobile industry, it is worth noting that the current market conditions seem to be different from those before.
Market sales are “halved”, and car companies face dual pressures on production and sales
“Can’t make it” and “can’t sell it” is probably the problem that many car companies are facing.
According to the latest statistics from the Passenger Federation, in April this year, domestic passenger car production was 969,000 units, a year-on-year decrease of 41.1% and a month-on-month decrease of 46.8%; the retail sales volume last month was 1.042 million units, a year-on-year decrease of 35.5% and a month-on-month decrease of 34.0%. In April, both the year-on-year and month-on-month growth rates of retail sales were at the lowest level in the history of the month.
The data released by the China Automobile Association is also not optimistic. In April, the domestic auto market sold 1.181 million vehicles, a year-on-year decrease of 47.6% and a month-on-month decrease of 47.1%.
In fact, since the outbreak of the epidemic, the auto industry’s analysis of market sales of models, car companies and even the industry has decreased. The reason is that sales data is too much interfered by uncontrollable factors such as the epidemic, raw materials, supply chain, etc. The superficial data does not fully reflect the market operation results of car companies.
This is indeed the case. The Passenger Federation pointed out: “Affected by the epidemic, there is a shortage of imported parts and components, and domestic suppliers of parts and components in the Yangtze River Delta region cannot supply in time, and some even completely stop work and operations. In addition, the logistics efficiency is reduced and the transportation time is uncontrollable. The problem of poor production is prominent.”
The China Passenger Car Association said that in April, the production of the five major car companies in Shanghai dropped by 75% month-on-month, the production of major joint venture car companies in Changchun dropped by 54%, and the overall decline in other regions was 38%. The national radiation effect of the parts system in Shanghai highlight.
It is understood that SAIC’s April production was reduced by more than 60% year-on-year. The two joint ventures, SAIC Volkswagen and SAIC-GM, produced only 27,307 vehicles and 23,807 vehicles per month, down 75.11% and 68.56% year-on-year respectively.
In addition, Changan Automobile produced 112,639 vehicles in April, down 44.88% year-on-year; the joint venture brand Changan Mazda produced 3,303 vehicles last month, down 70.58% year-on-year, and Changan Ford produced 9,199 vehicles, down 39.96% year-on-year.
In addition to “can’t make it”, “can’t sell it” is also a problem that car companies have to face.
According to data from the China Passenger Transport Association, in April, the retail sales of domestic self-owned brands was 480,000 units, a year-on-year decrease of 19% and a month-on-month decrease of 37%; the retail sales of mainstream joint venture brands was 450,000 units, a year-on-year decrease of 42% and a month-on-month decrease of 24%; The retail volume of luxury car brands was 120,000 units, down 54% year-on-year and 50% month-on-month.
It is worth mentioning that in the past few years when the overall negative growth of the auto industry, luxury brands were the only market segment that maintained positive growth.
Cui Dongshu, secretary general of the Passenger Federation, said: “The luxury car sales area has been affected by changes in the epidemic prevention and control situation, resulting in huge losses in production and sales, and the original tight supply and demand balance has been broken again.”
In terms of joint venture brands, SAIC Volkswagen, SAIC-GM, FAW-Volkswagen, Changan Automobile, Great Wall Motor, FAW Toyota, Dongfeng Nissan and other manufacturers fell by more than 40%. Among them, as a domestic joint venture giant FAW-Volkswagen, sales in April fell by 62% year-on-year.
In terms of self-owned brands, 10 auto companies including SAIC, GAC, Changan Automobile, Geely Automobile and Great Wall Motor all experienced double-digit year-on-year declines.
The leading new force in domestic car manufacturing, Li Auto delivered 4,167 vehicles in April, down 62.2% month-on-month, while NIO delivered 5,074 vehicles in April, down 13.5% year-on-year and 49.2% month-on-month. Xiaopeng Motors delivered 9,002 vehicles in April, down 41.60% month-on-month.
Correspondingly, the passenger flow and delivery volume of 4S stores of car dealerships shrank. The data shows that in April, dealers in Jilin, Shanghai, Shandong, Guangdong, Hebei and other places were greatly affected by the entry and transaction. About 20% of the dealers’ stores of some brands were stationary, and the loss of passenger flow was obvious.
Rescue the market: local subsidies have been “on the road”, purchase tax reduction and exemption will be “shot”
The decline has not stopped. According to the data released by the Passenger Car Association from May 1 to 15, the retail sales of the national passenger car market was 483,000 units, a year-on-year decrease of 21%.
Cui Dongshu, secretary general of the Passenger Federation, believes that “for the market in May, orders and deliveries in the first week of May Day improved significantly compared with April, but compared with last year, there was a year-on-year decline of more than 30%, and the market recovery pressure is still great.”
At the beginning of April, the China Passenger Transport Association estimated that the epidemic may bring about a 15%-20% production loss. However, due to the actual impact of the industrial chain and logistics, the China Passenger Transport Association predicted that the impact of the epidemic on sales will reach about 40%.
In order to reverse the auto market, at present, Guangdong, Jilin, Jiangxi, Shandong, Tianjin, Shenzhen, Shenyang, Haikou, Jinjiang and other multi-level and multi-regional governments have successively issued relevant subsidy policies to “rescue the market”, and the policy extension will be until 6. At the end of July, part of it will even extend to the end of the year.
Cui Dongshu said: “These policies are still introduced according to the financial situation of various places. Where there is money, more money will be added, and where there is less money, less money will be added. Where there is no money, even if you want to make money, you will not be able to make it.”
Among them, each new energy vehicle in Guangzhou will receive a comprehensive subsidy of 10,000 yuan. If it is a replacement or scrapped consumer, and the newly purchased model is a National VI model, a subsidy of 3,000 yuan can be obtained;
From May 21, 2022 (the time of the car purchase invoice), the Changchun Municipal Government will issue a total of 50 million yuan of car consumption subsidies;
Qingdao can enjoy a one-time subsidy of 3,000 yuan to 10,000 yuan according to different price points of different models;
Changsha City can obtain a 3% subsidy for the purchase of a naked car according to conditions, with a maximum of 3,000 yuan, and a maximum of 40,000 yuan for the purchase of new energy models;
In addition, Yiwu, Zhejiang introduced a car purchase subsidy of up to 10,000 yuan for new energy vehicles; Shenyang, Liaoning launched a car purchase subsidy of up to 5,000 yuan; Tianjin issued a maximum of 5,000 yuan per vehicle car consumption coupons; Hainan Haikou launched a car purchase of up to 5,000 yuan. subsidy.
Regarding local subsidies, Cui Dongshu said: “In the short term, consumption can indeed be boosted, but in the long run, sustainability is an issue.”
“In the long run, it is recommended to increase the purchase of cars and promote the renewal of stock.” The Federation of Passenger Transport Associations said that it is recommended to implement tax credit measures for car purchases, mobilize consumers’ enthusiasm for car purchases, and achieve sustainable growth in consumption.
As mentioned at the beginning, the executive meeting of the State Council was held a few days ago to further deploy a package of measures to stabilize the economy, and strive to push the economy back to a normal track and ensure that it operates within a reasonable range. The meeting pointed out that 33 measures will be implemented in 6 areas, including fiscal and related policies, financial policies, stabilizing industrial and supply chains, promoting consumption and effective investment, ensuring energy security, ensuring unemployment protection, subsistence allowances and assistance to the needy.
Among them, in terms of promoting consumption and effective investment, it is proposed to reduce the purchase tax of some passenger cars by 60 billion yuan in stages.
In this regard, Cui Dongshu said: “This policy will strongly stimulate automobile consumption.”
Help in the Snow: Rejuvenating Consumer Confidence is the Key!
“In 2009, 2015 and 2016, the vehicle purchase tax reduction and exemption policy was also implemented, which effectively promoted the development of automobile consumption and related industries.” said Jiang Zhao, a scholar at the Institute of Circulation and Consumption of the Research Institute of the Ministry of Commerce.
Indeed, in 2009 and 2015, the policy of halving the purchase tax of models with a displacement of 1.6L and below was launched, both of which promoted the growth of sales in the Chinese auto market. It was also 12 years ago that, stimulated by the purchase tax reduction, the domestic auto market achieved a growth rate of nearly 50%, and China has since become the world’s largest auto producer and seller.
After halving the purchase tax again in 2015, it increased by 14.93% year-on-year in 2016.
Jiang Zhao said: “The government has implemented a phased reduction in the purchase tax for some passenger cars, and has given car companies a ‘gift package’ policy, which has provided strong support for upstream and downstream enterprises in the automotive industry chain, and at the same time has reduced the burden of consumers on car purchases. It will help increase the willingness of residents to consume.”
But it is worth noting that if the first two purchase tax reduction policies are “icing on the cake”, then this time should be regarded as “help in the snow”.
According to data from the National Bureau of Statistics, from January to April this year, the total retail sales of consumer goods was 13,814.2 billion yuan, down 0.2% year-on-year. Among them, the retail sales of consumer goods excluding automobiles was 12480.7 billion yuan, an increase of 0.8%.
In April, the total retail sales of consumer goods was 2,948.3 billion yuan, down 11.1% year-on-year. Among them, the retail sales of consumer goods other than automobiles were 2,691.6 billion yuan, down 8.4%.
In other words, auto consumption from January to April and April caused a growth gap of 1% and 2.7% respectively, and the momentum of auto consumption is obviously insufficient.
Although it is said that stimulating automobile consumption is the primary task of stabilizing the automobile industry and promoting the steady growth of consumption. However, it is recalled that the two purchase tax reduction and exemption policies and the new energy vehicle subsidies in recent years are both in the domestic auto market or the new energy vehicle market as a whole in a state of growth or a period of consumption iteration.
In other words, the prerequisite for policy stimulus to play a substantial role or a positive growth market environment is the corresponding purchasing power and consumer confidence of consumers.
We see that in April 2009, the total retail sales of social consumer goods was 934.32 billion yuan, a year-on-year increase of 14.8%. Among them, the automobile category increased by 18.5%. In April 2015, the total retail sales of consumer goods was 2,238.7 billion yuan, a year-on-year increase of 10.0%. Among them, the automobile category increased by 5.3%.
Xue Xu, an associate professor at the School of Economics at Peking University, said that in the short term, Beijing and Shanghai have been affected by the epidemic, and both the use of cars and the possibility of car purchases have been greatly reduced. In the medium and long term, factors such as demographic changes and slowing income growth will also affect auto consumption.
In addition, the impact of policy incentives on the follow-up market should also be considered. We can see that the effect is weakening after the second reduction policy (2015). In 2016, the year-on-year growth rate was as high as 13.7%. In 2017, the growth rate narrowed to 3.04%. Until the withdrawal of the purchase tax preference in 2018, the auto market experienced negative growth.
Car cloud summary
It is true that from the State Council’s proposal to reduce the purchase tax of some passenger vehicles by 60 billion yuan, to the introduction of various subsidy policies by the local government, we can clearly feel the country’s determination to boost the automobile consumption market. As for how to implement it in the future and how much it may bring to the auto market, it is still unknown, but it is worth emphasizing that returning to the municipal level, how to guide and enhance the vitality of consumption through the macro level is also particularly important.
The pressure faced by both production and sales ends of the auto market in April this year can be seen as a short-term special situation caused by the epidemic. Fundamentally speaking, the focus of boosting car consumption should be to promote a comprehensive social aspect as soon as possible. To a certain extent, the effectiveness of the auto market incentive policies depends more on the effect of resumption of work, production and market.
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