In China, the world's largest auto market, retail sales of automobiles in the first half of this year fell 12.6% from a year earlier. With weak domestic demand persisting, some say Chinese automakers' push to expand exports could intensify price competition and trade friction in global markets.
According to China's National Bureau of Statistics, retail sales of automobiles at retail companies above a designated size totaled 1.9688 trillion yuan (about 420 trillion won) from January to June this year, down 12.6% from the same period a year earlier. It was the largest decline among major consumer goods categories tracked by the bureau. China's total retail sales of consumer goods rose 1.3% in the same period.
Sales volume also declined. According to the China Automobile Dealers Association Passenger Vehicle Market Information Joint Committee, retail sales of passenger cars in China in June were 1,602,000 units, down 23.2% from a year earlier. Cumulative sales in the first half were 8,701,000 units, down 20.2%.
Cuts to subsidies and tax incentives appear to have dampened demand, especially for lower-priced vehicles. This year's auto "old-for-new" subsidies shifted from a flat amount to a price-proportional scheme. If a buyer scraps a vehicle and purchases a new energy vehicle, 12% of the vehicle price is subsidized; for a replacement purchase, 8% is subsidized, meaning the lower the sales price, the smaller the actual subsidy. Cui Dongshu, secretary-general of the Passenger Vehicle Market Information Joint Committee, estimated that average subsidies this year will fall 21% for scrappage replacements and 30% for general replacements from last year.
The purchase tax benefit for new energy vehicles was also reduced this year from a full exemption to a 50% cut. As a result, the tax deduction cap per new energy passenger car fell from 30,000 yuan to 15,000 yuan.
Weak domestic demand and price competition also affected automakers' profitability. Profits earned by Chinese automakers above a designated size in the first half fell 19.5% from a year earlier.
Chinese automakers are offsetting falling domestic sales by expanding exports. According to the China Association of Automobile Manufacturers, auto exports in the first half were 5,096,000 units, up 65.3% from a year earlier. Exports of new energy vehicles rose to 2,355,000 units, about 2.2 times higher. During the same period, total auto sales in China were 15,017,000 units, down 4.1%.
As production that cannot be absorbed in the domestic market heads overseas, tariff and subsidy disputes over Chinese-made cars may continue in various countries. Still, the China Association of Automobile Manufacturers emphasized the need to strengthen local production, supply chain development, and regulatory compliance capabilities in the process of cultivating overseas markets.