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Auto Market Was Hit Hard by Epidemic

Mar 19, 2020 | By CENS

The China Automobile Dealers Association revealed on the 17th that in the first quarter of 2020, under the influence of the new crown pneumonia epidemic, the automobile market in mainland China continued to slump. In addition to terminal demand, it also affects the entire automotive industry chain. The vacancy rate of upstream component and vehicle manufacturers' production capacity is high, costs have risen, and financial pressure has risen sharply. Passenger flow in the showroom of downstream dealers recovered slowly, and new orders fell by over 80% year-on-year.

news-photoAuto Market Wasn`t Expected to recover until May.
China News Agency reported that as the epidemic situation in mainland China slowed down, the mainland auto market showed signs of recovery, but the overall recovery rate remains to be seen. Affected by the epidemic, manufacturers are more cautious in formulating sales strategies. According to dealer surveys, manufacturers' targets in March fell 38% year-on-year. In early March, the distributor's comprehensive return rate is about 50%, and it is expected that the comprehensive return rate will reach 70% by the end of the month.

The survey showed that the dealers had about 3 million inventories at the end of February, which was basically the same as that in January. The dealers replenished their inventory in March also faced tremendous pressure. Although the government plans to introduce a stimulus policy for the auto market, the actual landing is expected to take effect in the second quarter; public travel is gradually recovering, but consumer confidence in car purchases is unlikely to return to normal by the end of March.

The Association predicts that the decline in the automobile market in March will be better than that in February, and the automobile market is still hovering at a low level. It is expected that it will gradually pick up after April-May. The industry expects that after the epidemic, the auto market will regain its vitality.

Cui Dongshu, secretary general of the Passenger Car Market Information Joint Committee, said on the 17th that the automotive industry is now in a deep downturn, and policy support is needed to promote auto market consumption.

Cui Dongshu said that the impact of the epidemic on both the supply side and the consumer side of the automotive market is extremely large. The operating costs of enterprises have increased and the pressure on capital turnover has increased. Cui Dongshu pointed out, "If there is no strong stimulus policy at the national level, the current car retail sales are expected to be 19 million units in 2020, a decline of 8% year-on-year, and a 9% reduction from the forecast of 1% increase in 2020 at the end of 2019."

Cui Dongshu believes that most of the key measures now are to promote the demand for auto redemption, and the next step should be the first purchase.

In mainland China, the policy of reducing vehicle purchase tax by half was introduced in 2009 and 2015, and achieved good results. He predicts that if the purchase tax halving policy is implemented in 2020, it may drive sales growth of 2.59 million units, and the overall consumption tax and value-added tax will reach 60 billion yuan. In addition, he believes that comprehensive measures such as increasing car license plate quotas, implementing subsidies for mini electric vehicles to the countryside, and tax credits for car purchases should be considered in cities with restricted purchases.

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