January-March quarter sees growth contract 6.8% as compared to 6% growth a year ago; automobile production plunges 45.2% to 3.474m units and sales are down 42.4% to 3.672m units in the world's largest marketplace
17 Apr 2020 | 4759 Views | By Sumana Sarkar
The Covid-19 pandemic has dealt a body blow to the Chinese economy. Growth in the first quarter of 2020 shrank for the first time in 28 years since 1992. According to the National Bureau of Statistics, growth contracted 6.8% in the January to March 2020 period as compared to the ...
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The Covid-19 pandemic has dealt a body blow to the Chinese economy. Growth in the first quarter of 2020 shrank for the first time in 28 years since 1992. According to the National Bureau of Statistics, growth contracted 6.8% in the January to March 2020 period as compared to the 6% growth the country registered in the last quarter of 2019. Significant pressure on domestic transportation, tourism, catering, retail, manufacturing and other industries led the de-growth.
The contraction is even lower than the 6.5% de-growth estimated by analysts polled by Reuters. The forecasts from 57 analysts polled ranged from a 28.9% contraction to a 4% expansion. The de-growth is on the back of the lockdown following the Covid-19 pandemic that crippled economic activities in the country from January.
Further details from the National Bureau of Statistics indicate that first quarter retail sales in China fell 19% from a year ago while industrial production fell 8.4% in the same period. Tanking demand globally also led to the worsening of both industrial production as well as exports.
Automobile production and sales plunge by over 40%
Specific to the automotive sector, China saw significant downward pressure in Q1 2020. According to the China Association of Automobile Manufacturers, automobile production plunged 45.2% to 3.474 million units and sales witnessed a massive 42.4% decline to 3.672 million units on a year on year basis in the January to March quarter.
The decline in commercial vehicles was lower than that of passenger vehicles. Quarterly CV production was down 20.3% to 373,000 units and sales slipped 22.6% to 388,000 on a year-on-year basis. From January to March, the production of new energy vehicles (NEVs) was down 60.2% at 105,000 and sales slipped 5.4% to 114,000 year-on-year.
Though in March 2020 alone, automobile production in China saw a four-fold increase to 422 million units and sales saw a 3.6-fold increase to 1.43 million units, it could not sufficiently boost the growth numbers. The commercial vehicles space too saw three-fold increase in sales and production sequentially.
The country’s automotive industry prosperity index ACI was 6, down 21 points from the fourth quarter of 2019. In the first quarter of 2020, China’s automobile industry's consistent composite index was 79.22 (In 2010 it was 100), a decrease of 6.69 points from the fourth quarter of 2019.These two indicators point out that the downward pressure on the Chinese auto market in the future will be greater.
The China Automobile Association expects some recovery in the Chinese auto market in the second quarter of 2020 but maintains that it will be difficult to match the 2019 second quarter performance.
Meanwhile even as Chinese auto plants are resuming operations, a potential shortage of parts might pose a fresh roadblock to recovery with the pandemic causing production disruption in Japan, Europe and North America, some of the industry’s biggest markets and supplier of crucial components.
The key companies at risk include global names like Tesla, BMW Group, Guangzhou Automobile Group and Zhejiang Geely Holding Group. China imported $36.7 billion of vehicle components last year.
In terms of individual forecasts by automakers, Volkswagen expects a decline of 3-15% in the Chinese market in 2020 but confirmed plans to invest more than 4 billion euros ($4.4 billion) there. Nearly 40% of that amount will be allocated for EVs. The German carmaker targets selling1.5 million electric cars in China every year from 2025.