Circulation Association: January passenger car retail sales estimated at 2.2 million units; fierce competition may continue in 2024.

The China Automobile Dealers Association estimates that the retail sales of passenger vehicles nationwide in January will be approximately 2.2 million units. A new round of local government subsidies for vehicle purchases has been launched in various regions, and some automakers have launched New Year official price reduction activities to achieve a strong start in 2024, boosting January's retail sales growth.

In terms of used cars, from January 1st to 21st, the transaction volume reached 1.2 million units, a 1.2% increase year-on-year. The retention rate of various vehicle models in January fell across the board month-on-month. The association stated that the trend of faster price reductions in used cars has been accepted by most car dealers, and the previous model of high-price reluctance to sell is no longer feasible. Dealers need to accelerate the turnover speed.

Recently, the China Automobile Dealers Association projected that the national passenger car terminal retail sales in January will be about 2.2 million units. Due to the low base in the same period last year, the year-on-year growth rate is large, but the month-on-month rate has fallen.

Automakers are keen on a 'strong start', and involution may continue in 2024.

The association stated that as the Spring Festival approaches, the heat of the car market in January has cooled significantly compared to the end of 2023. The expiration of last year's consumer stimulus policies and the yet-to-be-fully-implemented new round of subsidy policies have led to a wait-and-see attitude among consumers. Therefore, January's auto sales fell short of expectations, increasing the sales pressure on dealers, who are clearing inventory to lighten their load for the New Year and have low replenishment intentions.

Data shows that the China Automobile Dealers Inventory Warning Index in January was 59.9%, down 1.9% year-on-year and up 6.8% month-on-month. The association stated that the January inventory warning index is above the prosperity and decline line, and the automobile circulation industry is in a downturn, with the prosperity level falling slightly from the previous month.

Source: China Automobile Dealers Association

However, the Spring Festival's return home rush and pre-festival car purchase demand support car market sales. At the same time, a new round of local government subsidies for vehicle purchases has been launched in various regions, and some automakers have launched New Year official price reduction activities to achieve a strong start in 2024, boosting January's retail sales growth.

Entering February, affected by the Spring Festival and reduced working days, the association expects that dealer traffic and sales will decline significantly, and the car market will enter the traditional off-season. At the same time, it is expected that the involution in the automotive industry will continue in 2024. The association suggests that dealer groups should be cautious in investing during brand switching, adjust their inventory structure, strengthen financial control, and ensure cash flow safety.

Faster circulation of used cars, declining inventory cycle

In terms of used cars, the association's latest data shows that from January 1st to 21st, 2024, the transaction volume of used cars reached 1.2 million units, a 1.2% increase year-on-year.

Source: China Automobile Dealers Association

In December last year, the national used car market transaction volume was 1.661 million units, a 0.6% month-on-month increase and a 17.3% year-on-year increase, with a transaction amount of 108.78 billion yuan. Among them, the transaction volume of used new energy vehicles was 87,300 units, a 1.2% month-on-month increase and a 115.0% year-on-year increase.

In 2023, the cumulative transaction volume of used cars reached 18.413 million units, a 14.9% year-on-year increase, with a cumulative transaction amount of 1179.53 billion yuan. Among them, 763,000 used new energy vehicles were traded, a year-on-year increase of 42%.

By vehicle type, among used passenger vehicles, sedans had a cumulative transaction volume of 10.897 million units in 2023, a 14.4% year-on-year increase; SUVs had 2.378 million units, a 16.7% year-on-year increase; MPVs had 1.141 million units, a 17.8% year-on-year increase; and crossover passenger vehicles had 361,000 units, a 2.9% year-on-year increase. Among used commercial vehicles, freight vehicles had 1.497 million units, a 15.5% year-on-year increase; and passenger vehicles had 1.073 million units, a 3.1% year-on-year increase.

By vehicle age, the transaction volume of low-mileage vehicles increased in 2023. The transaction volume of 3-6 year-old vehicles was the highest, accounting for 43.5%, a 3.3% year-on-year increase; vehicles within 3 years accounted for 28.0%, a 2.0% year-on-year decrease; 7-10 year-old vehicles accounted for 20.2%, a 0.6% year-on-year increase; and vehicles over 10 years old accounted for 8.3%, a 1.9% year-on-year decrease.

In terms of retention rate, the retention rate of various vehicle models fell across the board month-on-month in January. The association stated that the trend of faster price reductions in used cars has been accepted by most car dealers, and the previous model of high-price reluctance to sell is no longer feasible. Dealers need to accelerate the turnover speed.

The price reduction of used cars in January has a certain "panic" factor. The "price war" before New Year's Day and the uncertainty of the market after the Spring Festival have prompted sellers to hope to conclude transactions as soon as possible. The association's survey shows that the average inventory cycle of used car dealers in January was 58 days, 3 days less than in December 2023.

It is worth mentioning that the retention rate of new energy vehicles in January reached a new level, with the three-year retention rate of plug-in hybrid vehicles increasing to 55.2% and pure electric vehicles increasing to 54.7%. The association analyzed that used plug-in hybrid vehicles have a certain pure electric cruising range and good energy consumption level, and thanks to the construction of charging and swapping infrastructure in 2023, the practicality of used pure electric vehicles has improved. (China Economic Net reporter Chen Mengyu)

Source: China Economic Net