BYD Leads By Miles
At the Shanghai auto show, global auto executives are returning to a vastly different market than the one they left in 2021. China-made brands now dominate key segments, propelled by new electric-drive models that are gaining ground both domestically and internationally.
- BYD, in particular, has emerged as the biggest winner with a nearly 69% increase in sales this year, giving it an 11% share of the overall car market in China
- As established global brands struggle to keep up, the market is becoming increasingly stratified, with a few winners and many losers
China's Electric Car Sales Surge Despite Overall Decline In Passenger Car Sales
According to the China Passenger Car Association, sales of passenger cars in China decreased by 13% in the first quarter. However, sales of electric vehicles (EVs) and plug-in hybrids (PHEVs) increased by 22%, an area in which Chinese automakers, particularly BYD, lead the market. Meanwhile, sales of internal combustion vehicles declined by a similar percentage.
- This has negatively affected global brands like Volkswagen, General Motors, Honda, and Nissan, both in terms of sales and market share
- More than 40 auto brands, including Tesla, have lowered their EV prices since January, sparking a price war that has increased the sales of EVs and PHEVs, both of which are classified as "new energy vehicles" in China
- However, analysts say that this price war has also reduced industry-wide profitability
JPMorgan Raise China's Economic Forecasts
After China reported a 4.5% growth in gross domestic product during the first quarter, analysts at Citi and JPMorgan raised their predictions for the country's economy for the full year.
- JPMorgan, in particular, raised its outlook for 2023 growth to 6.4%, a rise from the previous estimate of 6%
- The bank's chief China economist, Haibin Zhu, wrote in a note that the strong GDP report indicates further growth in the future, fueled in part by a rebound in travel-related consumption and services
- The bank anticipates that China's recovery will continue in the short term, but its growth momentum will begin to soften in the second half of the year
Citi And UBS Also Raise China's Economic Forecasts
Citi also increased its forecast for China's economic growth to 6.1%, which is higher than the consensus estimate, from its previous forecast of 5.7%, stating that the economy is recovering strongly after Covid, with a focus on consumption and services.
- The bank also believes that the strong GDP growth in the first quarter indicates that there will be further growth in the future
- Citi economists, led by Xiangrong Yu, added that the momentum may be stronger than the headline number suggests, as the meaningful recovery started only after the Chinese New Year
- While services outperformed in the consumption-driven growth for the first quarter, Citi economists remain cautious on their forecasts due to the lack of significant stimulus and intensifying discounts
UBS also raised its forecast for the year from 5.4% to 5.7%, citing a strong rebound in consumption and property.
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