In the first six months of 2017, Chinese car sales are up just 3% to 10,93 million. If the market maintains this growth rate, it will become the lowest increase in more than 13 years and possibly in more than 25 years. And there’s reason to believe it will come to that scenario, if you look at the sales curve in the second half of 2016, with increasing sales in the last quarter due to a pending increase in sales tax on cars with engines smaller than 1,6 liters, from 5% to 7,5%. Then again, that same tax will rise again in 2018 to 10%, so sales may show a similar curve in Q4 of 2017 as consumers pull forward their buying decisions to benefit from the lower tax. Back to the first half of 2017, in which crossovers and SUVs gained 14,9% to 4,41 million sales, while sedan sales were down 2,5% to 5,42 million and MPV sales slumped 9,4% to 1,09 million. Of these 10,9 million total passenger car sales, 42,3% came from domestic brands and 57,7% from import brands, compared to a ratio of 41,3% vs. 58,7% in all of 2016, as sales of foreign brand vehicles have slightly dipped while sales of local brands have continued to rise, especially thanks to the introduction of a range of afFordable crossovers by almost every single brand.
But that doesn’t paint the complete picture, as European brand sales have remained virtually stable at +0,85% and US brand sales have improved only slightly better than the overall market at +3,86%. The big shift has taken place between Japanese brands and South-Korean brands, as the former are finally starting to recover from their troubles during a diplomatic spat between China and Japan in 2012 over a few islands in the East China Sea, even though only Honda and Mitsubishi have returned to the market share they held in 2011. Still, Japanese brands have grown at a pace of +16,36%, double the gains of the domestic brands, while Korean brands were the only nation to lose volume at a terrifying -46,7%. The reason for that demise has been explained in our monthly reports for the last four months, but there’s another underlying reason which has been going on for a longer period. The South-Korean brands never achieved the kind of mainstream status in China as they did in Europe or North America. They remained a low-cost, low quality option for customers who wanted an import-brand vehicle without having to pay the premium for an actual established brand from Europe, the US or Japan. When the domestic brands started to improve their quality and subsequently their brand image, and also started launching a huge number of afFordable crossovers to satisfy the demand for this type of vehicle, the Koreans were left behind as customers proved less brand loyal than expected. Especially Hyundai has been left behind in this race as its partner Beijing Automotive keeps on expanding the brand’s sedan range to no less than 9 models of different generations sold alongside each other with a 10th nameplate coming up, compared to just 4 crossovers. When recovering from the anti South-Korean sentiment, both brands need to be quick to launch afFordable crossovers to the Chinese market or risk facing reduced market shares for years to come.
At model sales level, the Wuling Hongguang MPV maintains its traditional leadership, despite not leading the charts in both May and June. Second and third place are also stable for the Volkswagen Lavida sedan and the Haval H6 crossover, although all 3 chart toppers lose volume on H1 of 2016. The Buick Excelle GT, the best seller in June, moves up to #4 while the GAC Trumpchi GS4 becomes the 2nd best selling crossover as the Baojun 560 (down to #23 overall) is cannibalized by its smaller sibling 510 (#21). The Nissan Sylphy manages to outsell the Toyota Corolla, while the Volkswagen Tiguan becomes the brand’s #2 in 8th place, ahead of the Jetta and Sagitar as VW places no less than four models in the top-10 and five in the top-12 thanks to the Santana. The Geely Boyue is the fastest growing model in the top-20, while the aformentioned Baojun 510 is the highest ranking newcomer, just ahead of the Roewe RX5 at #22 and the Baojun 310 at #31. The Chevrolet Cavalier follows at #33 but greatly cannibalizes the Chevrolet Cruze, down to #107 with sales down 72%. Other notable movers and shakers are the Dongfeng Fengguang 580 at #25 and the Honda Civic at #27. Also worth mentioning is the GAC Trumpchi GS8 at #75 with over 50.000 sales, an absolute impressive performance for a domestic SUV of its size and proving the local brands can be stretched beyond just budget models if the product and design are right. The Soueast DX3 (#83) and Chery Tiggo 7 (#99) prove that a single model introduction can accelerate a brand from niche player to mainstream.
As Volkswagen grows slower than the overall market at just +1,9% as it still lacks the crossovers to match the demand from the marketplace, the brand still sells more than 2 times as many vehicles than its nearest competitor. Audi has suffered from dealers stopping factory orders after the brand revealed plans to start a new production Joint Venture with SAIC, which would include a second distribution network for those models. These dealer boycotts pushed the brand to finally decide in May to postpone those plans, but it still suffered from slowing sales while its rivals BMW and Mercedes-Benz close the gap to the traditional luxury car sales leader. In terms of locally produced models, Audi keeps the lead despite a loss of 8,7% while Mercedes-Benz gains 50% and BMW gains 30%. However, when including imported models, Audi deliveries fell 12% to 254.800 while Mercedes-Benz sales increased 35% to 292.679 vehicles including Smart, but BMW became the luxury sales leader with a gain of 18% to 293.280 vehicles, including Mini and Rolls Royce.
Chinese owned Swedish rival Volvo gained 22,5% to 39.00 sales, while Land Rover improved 34,8% on its two locally produced models. Porsche, which imports all of its cars from Germany, saw its sales rise 18% to 35.864 vehicles in the first half of the year, as China is the only market where base versions of the Boxster and Cayman with the 2-liter, four-cylinder engines have only 250hp to fall in a lower tax bracket. The downgraded engines allow Porsche to sell the vehicles for a starting price under 600.000 yuan (€76.300,- / US$88,800). Porsche expects to double sales of these two models this year, besides continued strong sales of its two SUV models Macan and Cayenne.
Peugeot lost 37% of its volume in the first half of the year, while sister brand Citroën fared even worse at -63%. This means the brand that was one of the first Europeans to start a Chinese Joint Venture all the way back in the mid-1980’s is now only a few thousand sales ahead of Renault, a brand that only started local production last year. Citroën’s luxury brand DS performs even worse at -64% to barely over 3.000 sales, even less than newcomer Acura, but Fiat is the most embarrassing European brand at -78% to less than 2.000 sales in six months.
The big story among American brands in 2017 is of course Jeep, storming the charts to #28 with over 100.000 sales in the first half of 2017, helped by the expansion of its model range to 3 locally produced nameplates. Buick remains the best selling American brand and sells well over half a million cars in the first six months of 2017, five times as much as it sold in its home market. Still, a 2,9% loss strips it from its #2 position in the brands ranking to a fourth place behind two Japanese giants. Sister brand Chevrolet improves from its low point thanks to the Equinox crossover, while GM’s luxury brand Cadillac continues to storm the charts as it almost doubles its sales again, to 81.000 units, also more than it sold in the US. Compare this to Lincoln, which has no local production and suffers from the import taxes on all of its imported models, and Ford‘s luxury brand’s 24.541 sales are not even half bad. This is also almost a double up and is fueled by strong demand for the MKC crossover and the launch of the Continental sedan. Lincoln also expects China to become its largest market within a few years. Ford itself has only recently started to recover from a sales crash in the first quarter and is still down 10% for the half, allowing 3 domestic brands to pass it in the brands ranking as Ford falls to #10.
Honda has been an unstoppable freight train in its rise up the charts, nothing seems able to stop the brand as it continues to gain market share, helped by a stable and focused model policy, and even though it now has more than a couple of models that are duplicated and built by each of its 2 Joint Ventures (XR-V/Vezel, UR-V/Avancier, City/Greiz). Honda has improved its sales almost 26% in the first half and has climbed to the #2 spot in the brands ranking, ahead of Toyota, which increased almost 9%. Nissan grows 11% and holds on to 7th place. Mazda is also moving up the charts with a 33% increase in volume, but Mitsubishi is the fastest growing brand in the top-40 as it added local production of the Outlander crossover (#93). It’s closing in on Suzuki, which loses a third of its volume in its third straight year of declines. Keep in mind Suzuki sold more than 3 times as many vehicles in China as recently as 2015 but is now at risk of dropping below 100.000 annual sales for the first time since 2003 (our data does not go further back), while Mitsubishi is on track to sell over 100.000 cars in China for the first time ever.
We’ve already mentioned and explained the demise of Hyundai and Kia in China this year, and as a result of that, Hyundai has dropped from #5 to #12 in the brands ranking with a loss of 42% of its sales, while Kia drops from #15 to #25 with a loss of 55%. Let’s take a brief look at how their models have done so far this year. All but one (Mistra, #61, -16%) of Hyundai’s models are down by a third or more, and it has launched two new models this year: the Verna Yuena (New Verna) at #100 with almost 34.000 sales and the Celesta at #156 with just over 18.500 sales. The Celesta, a compact sedan based on the ancient platform of the fourth generation (2006) Elantra, was launched in March, just before the shit hit the fan between China and South-Korea. It sold a promising 8.000 units that month, but quickly dipped to just 1.000 sales in June, for an average of 4.600 monthly sales. Compare this to the similarly priced Chevrolet Cavalier, with almost 12.500 monthly sales or even a domestic rival like the Geely Emgrand GL at 8.500 monthly sales and you clearly see the effect of the diplomatic feud between the two countries. The Verna Yuena sold fewer cars in the first half of 2017 than it sold in the last quarter of 2016, when it was just launched. It also sold less than half the volume of its predecessor in the same period of last year. At Kia, 5 of its 9 existing nameplates showed losses of 50% or more, while two low-volume models (Cerato, #323, +27%, and Forte, #312, +6%) grow, as well as the K5 midsized sedan (#194, +8,6%). The newly launched KX7 SUV sold as many units in 6 monhts time as both the slighly smaller but more expensive Skoda Kodiaq and Peugeot 5008 sold just in June, and these models were still in start-up mode and are expected to achiever more than 3.500 monthly sales.
The big winner among Chinese brands is of course Geely with a gain of 84% to over half a million units. Geely is now just 1.200 sales behind Changan and is ready to become the best selling domestic brand this year, up from 5th in 2016. Its successful launch of a new design language, led by Volvo designer Peter Horbury, has boosted the brand, and it will continue to bring new and updated models to the market later this year, as well as launch its upmarket Lynk & Co brand to fill the gap between its namesake brand and its luxury brand Volvo. Meanwhile, Geely has increased its target for domestic sales for 2017 from 1 million to 1,1 million. Changan is down 5,5% but has kept its makret share of the full year 2016 intact. Baojun benefits from a continued expansion of its model portfolio, even if there’s some cannibalization between the models as it jumps from 10th place to #8 in the brands ranking, ahead of Haval, which appears to have stalled in its quest of becoming the world’s largest SUV brand, with a gain of just 4,2%. Dongfeng and BAIC are in trouble as has been described in our monthly reports, and Wuling suffers from declining demand from its best selling MPV Hongguang. GAC Trumpchi tops a quarter of a million sales for the first time, and SAIC Roewe breaks the 150.000 sales milestone, which is 50% more than it sold in all of 2015.
Among the medium-sized domestic brands, JAC (#27) is in trouble with a loss of 40%, while Zotye (#29) and Haima (#33) lose almost 30%, and Brilliance (#41) loses more than half its volume. Better performers are Soueast (#34, +44%) MG (#36, +61%) both thanks to successful launches of crossovers, respectively the DX3 and ZS, as well as Leopaard (#37, +36%), and JMC Jiangling (#47, +464%). Among newcomers, SWM Motor makes a splashing entrance with over 30.000 sales, ahead of Hanteng with almost 27.500 sales and Borgward with 21.500 sales. Bisu follows with 16.200 sales, but showed great improvement in June with 4.700 sales thanks to its new T5 crossover, so it could climb further in the second half of the year, while Borgward appears to have stalled despite the addition of the BX5, June being its second-lowest month since its launch.
China brands First Half 2017
Please note these figures are for locally produced models only, they exclude imported cars, which make up only a small portion of sales in China.
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