According to the China Association Of Automobile Manufacturers (CAAM), Chinese auto sales increased 13.9% in 2013, to end the year at a record high of 21.98mn units. We maintain our bullish outlook on the market in 2014 and see the strong sales momentum in the last few months of 2013 spilling over into early 2014. Consumer confidence remains high and we see it buoying vehicle demand.
However, we remain firm on our sector slowdown view for 2014, which is best demonstrated by the slower growth of 9.1% in vehicle sales we forecast for the full year. The recent reforms announced by the Chinese government will have the effect of slowing economic growth in the short term as the economy rebalances away from an investment-led model towards one where private consumption makes up a bigger share. Consumer sentiment will take a hit in the latter part of 2014 as economic growth falters and this will certainly have a negative impact on vehicle sales.
That said, we are of the view that despite a more challenging 2014 outlook for the sector, passenger car sales will still hold up reasonably well compared with commercial vehicle (CV) sales as the boost to private consumption will ensure more resilient demand for cars. As such, we forecast the passenger car segment to continue outperforming the CV segment in 2014 just as it did in 2013.
Passenger Car Segment Will Outperform In The Long Term
As the Chinese economy rebalances over the coming years to one where consumption makes up a larger share, the outperformance of the passenger car segment vis-a-vis the CV segment will persist. Over our 2014-2018 forecast period, we expect car sales to grow 7.8% a year on average versus 4.4% a year average growth for the CV segment. Therefore, we believe there is greater value in passenger car brands, which are industry leaders, rather than pure play CV manufacturers.
According to the CAAM, a total of 17,600 EVs were sold in 2013, which included 3,038 plug-in hybrids....
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