China Car Production

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Following our article on missing cars in China (the title was a bit tongue in cheek the cars haven’t gone missing there is just a disconnect between manufacturers car production figures and new car registrations) we have received queries from readers that we thought deserved some further detail. The original article stated that the manufacturer BYD quoted production of one model at 30,000 cars by the end of 2008, but car registrations, as recorded by the number plate registration bureau only recorded 10,000 for that model – suggesting a lot of new cars are going into inventory and the sales figures are being over reported. For anyone interested new car registrations in China can be found at the (Chinese language only) website listed at the bottom of the post.

Car production in China is showing two interesting trends. First, new car registrations ” our preferred measure as it shows what consumers are actually buying not what manufacturers are making ” have surged for cars below 1.6 litre following stimulus package tax changes that have removed consumer taxes on smaller engined cars from local brands. This has resulted in a surge in new car sales in the first quarter as this graph shows:

car-registrations.jpg

The second trend is where the cars are being sold. Traditionally, the developed coastal provinces of Shanghai, Beijing, Guangdong, Zhejiang etc have led the way in terms of growth and consumption. But this time around, the six highest provinces for new car registrations are all central and western notably Hunan, Anhui, Jiangxi and Henan, with Sichuan growing at 50% and Shaanxi at 70% in the first quarter. Buyers here are also older, the demographic being 35-40 year olds rather than 27-31 in the more affluent coastal provinces. Incidentally the province with the lowest growth in car registrations was export orientated Guangdong at zero. What does that tell you about China’s export industries?

The take away here? The stimulus package is clearly encouraging consumers from the more domestically focussed internal provinces to withdraw their cash and release some of the latent demand for new cars. The danger, as with all artificial stimulus activities, is that a delayed dip occurs when the buyers have bought and do not intend to change their cars for 3-4 years. If the world economy does not come back soon to lift the more export oriented coastal provinces, sales could begin to flag later this year. Meanwhile, producers are responding to the surge in sales by raising production and pushing cars through into the dealer supply chain. If the overall stimulus program is successful, and China resumes 8-10% growth then a 20% growth in new car sales and production may be sustainable, if not we could see car production falter later this year or early next.

New car registrations can be found here.

–Stuart Burns

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