July 24, 2019 - 5:30 AM EDT
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CRU: Why China's Auto Industry is Running Out of Gas

LONDON, July 24, 2019 /PRNewswire/ -- The Chinese auto sector has been contracting over the past 12 months to June 2019. This persistent weakness has surprised us and markets. Having reviewed the latest data trends and market intelligence from our customers and CRU's offices in China, we have downgraded our forecasts for 2019 and 2020. There are three reasons why CRU expects China's auto sector to remain weak in 2019-2020:

Why China’s auto industry is running out of gas
  • Payback for prior policy stimulus: The ending of the car sales tax rebate in 2018, has reduced auto demand in 2018, but looks to have extended into 2019.
  • Uncertainty remains elevated: Chinese policymakers are engineering a 'managed' slowdown in China, but it is not clear what that looks like, given the ongoing US-China trade war; such uncertainty is likely to suppress the purchase of new vehicles.
  • New (Stage VI) auto emissions standards were effective in many cities from 1 July 2019 and nationwide from 1 July 2020; the new rules inevitably create uncertainty for all market participants, manifested in temporary auto sector weakness.

Auto sector has seen a fivefold rise since 2005

The auto sector in China has seen impressive growth in recent decades. Auto production rose from 5.7 million units in 2005 to 28.3 million units in 2018 – a fivefold rise. 80% of the vehicles produced are personal cars, with 20% being produced for commercial use, such as vans and trucks. Every year since 2005, auto sector production has grown. It has grown very rapidly in some years such as 2009 – where production rose by nearly 50%.

The auto sector contracted for the first time in 2018. This is a significant event, given that the sector remained resilient even during the global financial crisis of 2008-2009. That makes the recent contraction in the auto sector a real talking point. Auto production fell from 29.1 million units in 2017 to 28.3 million units in 2018. We expect the contraction to continue into 2019 with production reaching 26.9 million units by the end of 2019. We expect the market to remain broadly flat, with 0.7% growth, in 2020. From that low base, we expect modest growth rates of around 2-3% allowing production to rise to ~30million units by 2023.

Read the full story: https://www.crugroup.com/knowledge-and-insights/spotlights/2019/why-china-auto-industry-is-running-out-of-gas/   

Read more about CRU: http://bit.ly/About_CRU

About CRU

CRU offers unrivalled business intelligence on the global metals, mining and fertilizer industries through market analysis, price assessments, consultancy and events.

Since our foundation by Robert Perlman in 1969, we have consistently invested in primary research and robust methodologies, and developed expert teams in key locations worldwide, including in hard-to-reach markets such as China.

CRU employs over 280 experts and has more than 11 offices around the world, in Europe, the Americas, China, Asia and Australia – our office in Beijing opened in 2004 and Singapore in 2018.

When facing critical business decisions, you can rely on our first-hand knowledge to give you a complete view of a commodity market. And you can engage with our experts directly, for the full picture and a personalised response.

CRU – big enough to deliver a high-quality service, small enough to care about all of our customers.

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Source: PR Newswire (July 24, 2019 - 5:30 AM EDT)

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