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back to index backCHINAtalk March,  2017


Autos/Trucks: China Auto Demand Beats January Expectations (2017)

China auto sales were flat yoy in January, solidly above our Q1 estimate for an 11% decline. Demand was well above Street channel checks that called for 20% declines in January given impact from Chinese New Year (caused lower selling days). Auto sales roughly flat yoy compares to preliminary numbers flat to down 10% that were released earlier this month (link) and could put upward pressure on our full-year estimate (-1% yoy). Commercial vehicle production +31% yoy versus our Q1 estimate +44%.

- China auto sales were flat yoy in January. This is a strong start to the year given the smaller government tax incentive on new vehicle purchases and timing of the Chinese New Year (which resulted in fewer selling days). As we discussed in our update earlier this month (link), January demand was well above the Street channel checks that called for 20% declines and above our Q1 estimate for an 11% decline. We currently estimate full year demand/production is roughly flat, but could be biased higher given solid demand thus far.

- Change in tax incentive appears to have shifted demand away from smaller vehicles to larger cars and SUVs. In January, mini cars and sub-compact cars fell 57% and 18% yoy, respectively. On the other hand, luxury cars and SUVs were up roughly 10% in aggregate.

- China production declined 3% yoy in January, tracking solidly above our estimate for an 11% decline in Q1. Excluding the 5-day impact from the Chinese New Year, we estimate production would have been up 15-20% yoy. Production was also better than the preliminary numbers we saw earlier this month (CAAM wholesale shipments estimated down 10%). This is partially because we don’t include some of the lower-contented light commercial vehicle segments that were weaker in the month (100-200bp impact). CADA dealer inventory early warning index moved to 61.5% (versus 56.6% yoy), but still within three-year range (40-65%).

- January by the numbers.

----- OEMs gaining share: Geely (+64% yoy), Renault-Nissan (+26%), Honda (+18%).

----- OEMs losing share: PSA (-53% yoy), BYD (-34%), Ford (-24%).

----- Premium deliveries: Mercedes (+34% yoy), BMW (+18%), Audi (-35% yoy given high dealer inventories).

- Commercial vehicle sales rose 52% yoy in January. Demand has been supported by very strong heavy truck volumes (+125% yoy) given enforcement of weight overloading rule. This drove strong growth in the back-half of 2016 (up roughly 35%) and should continue into the first-half of 2017.

- Commercial vehicle production expanded 31% yoy versus our Q1 estimate +44%. We expect full-year build to be roughly flat roughly consistent with WABCO (flat at the midpoint) and Volvo (down 6%).

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Source: BAIRD - GAI





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