China Autos: October PV Sales Up 9-14% MoM And Down 5-14% YoY, In Line
According to China Passenger Car Association (CPCA), in Oct 21 retail sales volume of passenger vehicles (PVs) in China grew 8.6% mom to 1.717m units, still 13.9% below that in the same period last year; while wholesale volume of PVs grew 13.9% mom and dropped 4.8% yoy to 1.978m units. In 10M21, retail sales volume and wholesale volume of PVs respectively grew 8.7% yoy and 9.1% yoy to 16.227m units and 16.581m units. Segment-wise, the Chinese brands continued to outperform the overall industry, growing 11% mom and 4% yoy in retail sales volume to 770,000 units, representing 45.6% market share (+8ppt yoy). The non-luxury JV brands saw 12% mom growth and 24% yoy drop in retail sales volume to 770,000 units. The luxury brands’ retail sales volume tumbled 11% mom and 27% yoy to 180,000 units. Dongfeng Motor (DFM), Geely, Great Wall Motor (GWM) and Guangzhou Auto (GAC) respectively registered 3%/7%/12%/17% growth and -21%/-20%/-17%/-8% drop in wholesale volume in Oct 21.
The passenger electric vehicle (EV) segment continued to outperform the overall PV industry in Oct 21, growing 141% yoy and 148% yoy in retail sales volume and wholesale volume to 321,000 units and 368,000 units respectively, representing 18.7% and 18.6% of total PV retail sales volume and wholesale volume in China. On a mom basis, passenger EV retail sales volume dipped 3.9% or 18,000 units mom in Oct 21, probably because Tesla China allotted more of its production capacity to export, cutting its domestic sales volume by >38,000 units. In 10M21, retail sales volume and wholesale volume of passenger EVs in China respectively surged 192% yoy and 204% yoy to 2.139m units and 2.381m units, representing 13.2% and 14.4% of total PV retail sales volume and wholesale volume in the country. BYD remained the largest passenger EV maker in China, growing 263% yoy and 14% mom in wholesale volume to >80,000 units in Oct 21 (22% market share/+7ppt yoy/+2ppt mom). That was followed by the number two player Tesla, which posted 348% yoy growth in wholesale volume to 54,391 units in Oct 21 (including 13,725 units of domestic sales and 40,666 units of exports). Other OEMs (eg SGM Wuling, SAIC, GWM, GAC Aion, Xpeng, Li Auto, etc.) also saw buoyant EV sales growth (please see the table below).
China’s PV Sales Volume (Sedans, SUVs And MPVs)
Auto Sales Volume By OEM
Source: The companies
October PV sales came in as expected, and we expect it to recover further from Nov 21, based on the easing chip shortage. According to AutoForecast Solution (AFS), global auto production volume loss as a result of chip shortage stood at 34,000 units in the first week of November (1-7 Nov 21), much lower than 63,000 units in the last week of October (25-31 Oct 21), 114,000 units in the week of 18-24 Oct 21 and 280,000 units in the week of 11-17 Oct 21. This was the third week of sequential improvement in a row, as the chip packaging plants in Malaysia have resumed production after the removal of lockdown measures in the country, and Taiwan Semiconductor Manufacturing Corporation (TSMC) are allotting more of its production capacity to automotive chips.
Although auto demand in China has weakened a result of resurgence in COVID-19 cases and slowdown of economy, demand still exceeds supply by a large margin. Given easing chip shortage and the low inventory level in channel (<1.5 months as of end-October), dealers will likely stock up further in preparation for the seasonal sales boom from end-21 till the Chinese New Year, spurring wholesale volume.
Maintain MARKET WEIGHT. Based on the faster-than-expected recovery of chip supplies, we now prefer OEMs, EV companies and auto parts companies. Top picks: BYD, CATL, GAC and Nexteer. Our BUY calls are in the following order of preference: BYD, CATL, GAC, Nexteer, Geely, Ningbo Xusheng, Fuyao Glass, Minth, Weichai, Sinotruk, Zhongsheng, Yongda and Meidong.
UOB Kay Hian (Hong Kong) Ltd