<News Alert> China auto sector – Dec-23 PV retail sales growth driven by year-end promotional sales, within expectations
- PV retail sales rose 8.5% y-o-y in Dec-23, largely attributable to inventory destocking and year-end price discounts
- Full year PV retail sales rose by 5.7% y-o-y for 2023, thanks to Ministry of Commerce stimulus measures like Auto Festivals and NEV Consumption Activities which had boosted demand
- NEV market posted 47.3% expansion y-o-y in Dec-23 and recorded a 36.2% y-o-y increase for the full-year
- We expect moderate growth ahead in 2024, with intensifying competition and discounts being valuation overhangs. Overall sector valuation is attractive; focus on NEV names like BYD and Li Auto
What has happened?
PV retail sales boosted by year-end promotions in Dec-23. China PV sales were up 8.5% y-o-y to 2.35m units in Dec-23, largely attributable to inventory destocking and year-end price discounts by automakers. For 2023, China PV sales amounted to c.21.7m units, a 5.7% increase y-o-y, thanks to the government measures (i.e. Auto Festivals and NEV Consumption Promotion Activities) rolled-out by the Ministry of Commerce during the year to boost domestic consumption. By brand segment breakdown, self-brand sales expanded 17% y-o-y to 1.24m units in Dec-23, and market share increased by 4.6ppts y-o-y to 52% in 2023. Sino-foreign brand/ luxury brand sales recorded 7% decline/ 23% growth to 790k/ 320k units respectively, in Dec-23. NEV retail sales growth expanded by 47.3% y-o-y to 945k units, a monthly record high, as EV players boosted their sales through price reduction to boost sales. A total of 7.74m units of NEVs were sold in 2023, rose by 36.2% y-o-y. NEV penetration hit 40.2% and for the full-year, at 35.7%. The EV new forces continue to gain market share, reaching 14.9%, largely attributable to the strong performance of NIO, Xpeng and Li Auto.
Expect a moderate 2024 outlook. Geely and GAC have announced their vehicle deliveries target at 1.9m/2.75m in 2024, a 13%/10% growth respectively. With the Chinese economy expected to post a soft-landing in 2024, we expect PV market to record a moderate sales growth of around 4% in 2024. Coupled with the anticipated intensified market competition, we expect automakers to face some margin pressure, which could be partly be mitigated by expected decline in EV battery metal prices such as lithium (our metals team estimates lithium average prices to decline by 45-55% in 2024). However, we expect the PV retail sales in Jan-24 to be significantly higher than Jan-23, due to the low base caused by the early Spring Festival in 2023 and the front-loading effect prior to the withdrawal of government NEV subsidies.
