Visitors check out a car at an auto show in the small city of Fuyang, in Anhui province. [Photo/China Daily]

Consultant expects sales of domestic autos to grow by 8 percent in 2016

In line with forecasts, both production and sales of passenger cars in September saw considerable growth in the preceding month.

However, when compared to the same period last year, production levels were lower, with year-on-year output down for the fourth consecutive month, while, in contrast, sales picked up to some extent. Crucially, passenger car inventory levels fell yet further.

In the month of September, production and sales of passenger cars, excluding imports, reached 1.56 million and 1.69 million units, respectively, up by 21 percent and 24 percent on the previous month, while production fell by 4.6 percent and sales rose by 6 percent in year-on-year terms, with strong demand for SUVs driving the growth in sales.

The September passenger vehicle's seasonally adjusted annual rate (including imports) is estimated to be 20.34 million units, up moderately (4.1 percent) from 19.53 million units in August - and slightly higher than we expected.

Vehicle registrations reflect the ongoing strength in the retail passenger car market as the number of new registrations during August climbed 16 percent from last year.

As automakers cut production rates, while retail sales rose steadily, the gap between wholesale deals (including exports) and registrations during the first eight months of the year narrowed to 180,000 units, equivalent to 1.5 percent of total passenger car registrations.

Given that exports of domestic passenger cars exceeded 190,000 units in the first eight months of 2015, wholesale levels (excluding exports) fell below those of registrations by about 10,000 vehicles.

In short, the impact of Chinese automakers' efforts to lower stock levels are becoming increasingly evident in the market. In percentage terms, for the first eight months of the year, registrations increased by more than 10.6 percent, while wholesale deals saw growth of just 4.8 percent.

As the destocking process progresses smoothly, the market will be on an increasingly steadier footing, with the foundations laid for growth in the final quarter of 2015 and into 2016.

From a city-tier perspective, total sales in first-tier cities fell by more than 19 percent in the January to August period, while second- tier cities saw a rise in sales of 4 percent.

The overall decline in the market can be explained by the drop in sales of passenger cars in both first- and second- tier cities.

Conversely, demand remained strong in cities ranked from three to six, with the rate of growth ranging from 10 percent to 19 percent.