China Auto Industry Reduces 2022 Outlook because of Low Commercial Demand

SHANGHAI – China’s auto industry association cut Monday’s sales forecast due to a slump in the market for commercial vehicles. This was because anti-pandemic precautions had weighed down on both the country’s economy and the largest car market in the world.

The industry will sell 27 million cars this year, up 3 percent on 2021, the China Association of Automobile Manufacturers forecast, cutting its outlook from the 27.5 million sales and 5.4 percent growth it predicted in December.

Weak demand for trucks and buses drove this downgrade according to data from the association. It now expects a 16 percent fall in sales of commercial vehicles to 4 million units.

The Overall growth is around 3 percent compared to the 4.4% achieved in 2021, and the 1.9% fall of 2020..

The auto sector has been hit hard in recent months amid rising COVID-19 cases. Many parts of China, including Shanghai have been subject to stringent security measures by the Chinese regime.

Authorities have tried incentives to revive demand, with the central authorities last month halving purchase tax to 5 percent for cars priced at less than 300,000 yuan ($45,000) and with engines no larger than 2.0 liters.

Several policies were created to encourage the sale of new-energy vehicle (NEVs) in many countries. Some local authorities started offering subsidies to trade in gasoline cars for electric vehicles.

Some municipalities have increased quotas for car ownership.

These policies contributed to an increase in annual sales in June after four months of falls. The industry sold 2.5 million vehicles in June, up 23.8 percent on a year earlier, the association said.

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But incentives have not helped commercial vehicle demand. This was awaiting recovery in activity in logistic and infrastructure sectors, which required more state support. Xu Haidong (the association’s deputy chief engineering) stated at Monday’s regular media conference.

June sales were also up 34.4 percent from May, with sales of NEVs–among them electric, plug-in petrol-electric hybrids, and hydrogen fuel-cell vehicles–climbing 129.2 percent from a year before.

While it reduced its overall projections for sales for the year, the association updated its NEVs forecast, estimating that 5.5 million units will be sold. This is more than 56% growth compared to last year’s 47% growth. The year’s passenger car sales would rise by around 7 percent.

Although June sales were buoyant, there are concerns that demand will once again be hit as COVID-19 cases tick up with the arrival of the BA.5 Omicron subvariant in China and cities impose new restrictions.

China’s automotive industry will continue to face challenges from chip shortages, rising raw materials costs and especially electric-vehicle battery prices, stated Chen Shihua (deputy secretary-general).

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