China's Q1 Passenger Car Sales Plummet... Joint Venture Cars Not Selling Well

Published 11 Apr.2023 09:39(KST)

China's passenger car sales in the first quarter sharply declined, showing a sluggish trend. While local brand passenger cars performed relatively well thanks to strong electric vehicle sales, joint ventures with foreign companies struggled.

According to Chinese economic media Caixin on the 10th, the China Passenger Car Association (CPCA) reported that retail sales of passenger cars in China reached 4.261 million units in the first quarter of this year, down 13.4% year-on-year. Quarterly sales volume dropped sharply from 5.078 million units in 2019 to 3.014 million units in 2020 during the early spread of COVID-19, then recovered to 5.092 million units in 2021, before decreasing again to 4.915 million units last year.

[Image source=Reuters Yonhap News]

CPCA cited factors behind the weak sales in the first quarter, including early vehicle purchases before the Spring Festival, anticipation of price discounts, and other sales stimulus measures.

Looking at recent sales trends, the poor performance of joint ventures stands out. According to CPCA data, retail sales of local brand passenger cars in the first quarter were 2.12 million units, down only 5% year-on-year, whereas sales of major joint venture brand vehicles were 1.49 million units, plunging 25% during the same period. Research from Ping An Securities showed that the sales decline rates were 31.7% for Shanghai Volkswagen, 32.3% for Shanghai GM, 29.6% for Guangqi Honda, and 10.9% for Guangqi Toyota.

Thanks to this sales gap, local brands' market share rose by 3.8 percentage points year-on-year in the first quarter, reaching 50%. They especially showed strong performance in new energy vehicles, including electric cars, and exports. According to CPCA, retail sales of new energy passenger cars in China increased by 22.4% year-on-year to 1.313 million units in the first quarter. BYD's new energy passenger car sales in the first quarter were 548,000 units, with a market share exceeding 40%.

Ping An Securities pointed to differing demands from Chinese and foreign shareholders, conflicts between foreign companies' requests to increase equity stakes and China's pursuit of independent development, as reasons behind the joint venture brands' poor performance. They also noted that joint venture brands lack competitiveness in the new energy vehicle sector and are lagging in channel reforms.

Meanwhile, passenger car exports reached 780,000 units, up 90% year-on-year. Among them, 223,000 new energy vehicles were exported. Tesla China exported 92,000 units, SAIC Motor 56,000 units, and BYD 39,000 units respectively.