The recent decline in the growth rate of automobile consumption has slowed down significantly. If the relevant policies can be put in place, the automobile consumption is expected to stabilize during the year, or it will form a certain support for the zero consumption data of the society.
Editor’s note: This article is from WeChat public account “ Finance magazine “(ID: i-caijing), author: Chen Jianguang Jiang Chuan Yue.
In recent years, as the largest share of consumption, automobiles have a long and wide industrial chain, which plays an extremely important role in stimulating consumption and economic growth. However, since 2018, China’s automobile consumption data has performed poorly and has become An important reason for dragging current consumption.
Since May, Sino-US trade friction has once again warmed up, and many factors of macroeconomic instability have once again become prominent. Under the impact, the probability of export declines, and manufacturing investment may continue to weaken. In this context, consumption will undoubtedly become one of the most important variables affecting the economic trend, and whether it can stabilize and rebound is quite critical. As the largest proportion of consumption, boosting automobile consumption will be the most important part of the stimulus policy. What is the reason for the decline in the current car consumption? What about the future prospects?
Status of domestic automobile consumption
In 2018, the growth rate of automobile consumption dropped significantly, and it stabilized in 2019. From the data point of view, the year-on-year growth rate of the automobile consumption indicators of the Statistics Bureau and the China Automobile Association in 2018 both showed a rapid decline, and the whole year was the first negative growth in history.
Among them, the statistical growth rate of automobile retail sales of the Bureau of Statistics decreased by 2.4%, and the sales volume of China Automobile Association decreased by 2.8%. In 2018, the total retail sales of enterprises above designated size rose by 5.7% year-on-year. According to estimates, the car sub-segment dragged down by nearly 0.7 percentage points, the largest of all sub-items.
Since 2019, the retail sales of autos have rebounded from -8.5% at the end of last year to 2.1%. Although the sales of autos have not improved, they have not deteriorated significantly. The total retail sales of goods from January to May 2019 increased by 3.6% year-on-year.The car sub-project dragged down nearly 0.6 percentage points, still the largest among the sub-items.
High-end cars are better than low-end cars, and imported cars are better than domestic ones. In terms of passenger car classification, the sales of passenger cars of Japanese and German brands with relatively high relative prices since 2018 are relatively stable year-on-year; while the self-owned brands with low prices and American brands have fallen significantly, and the highs of 2018 have fallen since then. 20-40 points. Therefore, In the context of the overall decline, car sales show that high-end cars are better than low-end cars, and imported cars are better than domestic cars.
The year-on-year growth rates of autos and necessities and real estate-related retail are relatively synchronized. The reason is that the author guesses that cars, necessities (food and beverage, clothing, daily necessities) and real estate-related goods (home appliances, furniture, construction and decoration) are all significantly affected by macroeconomics, such as credit cycle, resident income, wealth. Effects, etc., thus presenting relatively synchronous features. Oil and products are subject to fluctuations in crude oil prices, and their relationship with other commodities is relatively weak.
Short-term factors in the decline of automobile consumption
The short-term factors affecting car consumption are multifaceted, including stimulus policies, consumer credit, and household income. Exploring the reasons for the decline in automobile consumption since 2018 will help to understand the driving force of automobile consumption fluctuations and judge its trend.
Overdraft demand for purchase tax incentives
On September 30, 2015, the Ministry of Finance and the State Administration of Taxation jointly issued a notice “From October 1, 2015 to December 31, 2016, the purchase of 1.6-liter and below-displacement passenger vehicles will be reduced. The vehicle purchase tax is levied at a 5% tax rate.” On December 15, 2016, the two departments issued a notice again, “From January 1, 2017 to December 31, 2017, the purchase of vehicles with a displacement of 1.6 liters or less will be levied at a rate of 7.5%. Tax. From January 1, 2018, the vehicle purchase tax will be levied at the statutory tax rate of 10%.”
The purchase tax preferential policy has greatly stimulated automobile consumption in 2016 and 2017, but at the same time overdrafted the demand for car purchase in 2018 and caused a high base, which is an important reason for the significant decline in car consumption growth in 2018. From 2016 to 2017, the retail sales of autos increased by 5%-10% year-on-year, and fell to -2.4% in 2018. The same is true for auto sales. Reference history, in the implementation of the purchase tax preferential policy from 2009 to 2010, the annual growth rate of automotive retail salesMore than 30%, and in 2011 significantly fell below 15%.
*Resident Consumer Credit Contraction
Automotive consumption has strong financial attributes and will be highly dependent on financing behaviors, such as consumer loans for banks, auto finance for car companies, and financing options for third-party platforms. In 2018, affected by the de-leverage of the real economy, the growth rate of social financing stocks continued to drop from 12.7% at the beginning of the year to 9.8% at the end of the year, and the credit cycle fell.
In the same year, the No. 58 document of the Mutual Rehabilitation Office was released, and the supervision of cash loans was upgraded, resulting in a large number of cash loans and P2P platforms running out of default, and consumer finance was also affected. The data shows that the P2P turnover of Che Yi Lian has dropped from a high of over 80 million yuan in March to a level of only 10 million yuan in the fourth quarter. As a result, the credit cycle has rebounded and the regulatory upgrade has led to a significant decline in the availability of consumer credit, which has also had a huge impact on automobile consumption.
In history, the correlation between household short-term consumer loans and auto retail sales growth was better. In 2018, the year-on-year growth rate of household short-term consumer loans fell from around 40% to less than 30%, and the retail sales of automobiles continued to fall during the same period. This also shows that the weakening of automobile consumption in 2018 is inseparable from the decline in consumer credit.
Resident income growth rate declines
In the long run, nominal GDP—resident income—consumption is the core logic for analyzing consumption. The high growth rate of nominal economy tends to drive the growth of disposable income of residents, thus promoting the demand for alternative consumer goods such as automobiles.
Historically, except for the years that were greatly affected by the policy stimulus (2009-2010, 2016-2017), the growth rate of automobile sales was basically consistent with the trend of the growth of disposable income of residents. Along with the decline in nominal GDP growth, the per capita disposable income growth rate has dropped from 8.3% at the end of 2017 to 7.8% at the end of 2018, thus curbing the optional consumption of automobiles.
Fortune effect shrinks
In 2018, the domestic stock market continued to fall, and the year-on-year growth of residential prices slowed down, resulting in a decline in the wealth of residents.Alternative consumer demand, such as automobiles, has a negative impact. For the whole year of 2018, the Shanghai Composite Index fell by nearly 25%, and the 100-city residential price index fell from 7% to 5%. The sharp rebound in the stock market in the first quarter of this year also corresponds to the year-on-year growth rate of auto retail sales.
However, the recent Sino-US trade disputes, the stock market has been greatly affected by this impact, has fallen nearly half of the increase since the beginning of last year, and the uncertainty of the domestic capital market trend increased. In addition, the Central Political Bureau meeting has not relaxed its position on real estate regulation and control, and the wealth effect brought about by rising housing prices will continue to weaken.
In addition, the consumer’s wait-and-see mood is evident in the early implementation of the National Six Standards and the expectation of stimulus policies. Automobile manufacturers are also affected by this, adjusting models, reducing production and wholesale activities, dealer inventory pressure is still high.
At the same time, domestic car sales are also adversely affected by Sino-US trade frictions. China raised its tariff rate on imported cars from the United States at the end of August last year, which will undoubtedly hit some consumers’ confidence. Although tariffs have been suspended for US autos and parts at the end of last year, the data shows that the decline in sales of American brand cars is still very obvious.
The bottom of the cycle?
In addition to the above short-term factors, historically, the automotive industry is a typical cyclical industry, and its consumption also presents a more typical cyclical feature. Therefore, lengthening the perspective and observing the position of China’s automobile consumption in the cycle will help to judge the medium- and long-term performance of automobile consumption. In addition, comparing the situation of developed countries in Europe and America, there are also potentials for judging the long-term growth potential of China’s automobile consumption. Must learn from the meaning.
The bottom of the car consumption cycle?
The author uses the year-on-year growth rate of the China Automobile Association (three-month moving average) to describe the automobile consumption cycle since 2008 to determine the current cycle position.
The data shows that from January 2009 to January 2012 (36 months in total) is the first round of automobile consumption cycle since 2008, and from January 2012 to August 2015 (43 months in total) is the first The second round of the cycle, from August 2015 to January 2019 (41 months in total) is the third cycle, with a length of about 40 months per cycle. We may be currently at the bottom of the third round of car consumption cycles since 2008.
The author also found that two of the inflection points of the first three rounds of automobile consumption cycle (January 2009 and August 2015) coincided with the introduction of the purchase tax preferential policy, which reflected the purchase tax preferential policy for consumption.The switching of cycles has an important impact.
On January 20, 2009 and October 1, 2015, China implemented the purchase tax halving policy for small-displacement passenger cars of 1.6L and below, and these two points coincided with the beginning of a car cycle. .
The author believes that there is an inherent correlation between the timing of the introduction of the policy and the turning point of the industry. The price of small-displacement passenger cars is relatively low, so the elasticity of demand is relatively larger, and its sales volume is relatively high, so the stimulus policy The introduction of the car has played a very important role in promoting the conversion of the car consumption cycle. Since 2019, the stimulus policies related to automobile consumption have been limited, and it is still necessary to observe whether it can really help switch the cycle.
The domestic automobile consumption still has growth potential
In 2018, China’s automobile consumption experienced negative growth for the first time, but car ownership is still rising steadily. By the end of 2018, China’s automobile ownership was 240 million vehicles, a year-on-year increase of 10.5%. Compared with the quantity of possession, the number of cars owned by thousands of people is a better indicator to measure the level of automobile consumption in a country.
In 2018, China’s 1,000-person car ownership was about 172 vehicles, a year-on-year increase of 10.1%. In 2018, the number of cars in the United States is about 831, and the number of cars in Japan and Germany is 619 and 611, respectively, and South Korea is about 440. The number of cars owned by thousands of people in China is much larger than that of developed countries. There is still room for improvement in the demand for automobiles by residents.
The domestic automobile industry started late, and automobile consumption is still not widely used. In the United States, Japan, Western Europe and other developed countries or regions, cars are almost a necessary means of transportation for every family, and they are mandatory. In China, cars are still only optional, and their popularity is still far behind developed countries.
In the future, with the further development of the economy and the gradual maturity of the domestic automobile industry, there is still room for improvement in per capita possession. At the same time, however, various factors have limited the growth of domestic car ownership, such as high tariffs on imported cars, high prices, inadequate road transport infrastructure, and restrictions on purchase restrictions. These factors are related to national policies and development. The level is closely related, which largely restricts the per capita car ownership to be in line with the developed economies.
Car consumption outlook
Overall, the current decline in automobile consumption has both short-term negative impacts and medium- and long-term cyclical conditions. Although the medium- and long-term potential is still in place, it is not realistic to rapidly increase the number of Chinese autos in a short period of time. Vibrating car consumption, policy will be more considering hedging short-term