May 11, 2020 / 6:35 AM / 23 days ago

China car sales mark first rise in 22 months, but virus to still slam 2020

SHANGHAI (Reuters) - China’s monthly auto sales rose for the first time in almost two years as the country eased virus-related curbs and reopened for business, but the annual number will likely be slashed by up to 25% if the pandemic continues, an industry body cautioned.

FILE PHOTO: Newly manufactured cars are seen at a port in Dalian, Liaoning province, China April 10, 2020. China Daily via REUTERS

The sales data for April and the gloomy outlook underline the challenges being faced by the world’s biggest auto market as it struggles to emerge from a prolonged slump in demand, which was first exacerbated by the trade war with the United States and now by the global health crisis.

Even if China contains the outbreak effectively, its auto sales is expected to drop 15% this year, from over 25 million units in 2019, the China Association of Automobile Manufacturers (CAAM) said, the country’s largest auto industry association.

In April, China’s auto sales reached 2.07 million units, up 4.4% from a year earlier, even as sales of new energy vehicles (NEVs) fell for a tenth month to 72,000 units, CAAM data shows.

NEVs include battery-powered electric, plug-in hybrid and hydrogen fuel-cell vehicles.

China’s auto sales sank 79% in February and 43% in March, pummelled by the virus as strict stay-at-home orders kept buyers away. Monthly sales last rose in June 2018.

“The sales rebound in April fell short of expectations but ... will increase in the next two months” due to the release of pent-up demand as lockdown measures are further eased, CAAM official Xu Haidong said.

Mainland China has reported 82,918 coronavirus cases and 4,633 deaths, but new infections since April have been fewer versus the thousands confirmed daily in February, allowing authorities to restart businesses and aiding auto sales.

Volkswagen (VOWG_p.DE) and Nissan (7201.T) reported positive China sales in April, while General Motors’ (GM.N) China ventures saw double-digit year-on-year growth.

The data supports a growing optimism that China’s auto business is improving, but experts caution the sector is not out of the woods yet and sales could take a bigger hit if the global health crisis deepens and chips away at its exports.

China’s auto exports are expected to drop by 200,000 units this year, from about a million in 2019, as virus erodes global demand, said Chen Shihua, a CAAM official, adding shutdown in overseas plants could disrupt China’s production supply chain.

Reporting by Yilei Sun and Brenda Goh; Editing by Himani Sarkar

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