New-Car Wholesales in China Jumped 7% in May
Increase hints at recovery pace for U.S., European car markets
Car dealers in China are stocking up on new-vehicle inventory again.
Factory sales of passenger cars to dealerships jumped 7% to 1.67 million units in May, the China Assn. of Automobile Manufacturers reports. Wholesales of commercial trucks, vans and buses soared 48% to 520,000 units.
Why It Matters
China was first in—and first out—of the COVID-19 crisis. Carmakers everywhere have been watching closely to see how quickly the Chinese market rebounds.
In particular, carmakers had been looking for an upturn in wholesales, which generate company revenue. Last month’s gain in factory sales was the first for the passenger car sector in 24 months, according to CAAM.
The turnaround indicates that new-car inventories are falling and retailers are bullish about future consumer demand.
Comparing sales behavior between global markets can get tricky, of course. That is especially true for China, where government policy and a broad array of national, local and manufacturer incentives come into play.
How governments have handled their response to the coronavirus only complicates matters.
China took draconian measures to contain the virus when it broke out in Wuhan. The country’s auto plants shut down for an average of 2-3 weeks in February before jumping back into production, says LMC Automotive. Sales revived quickly too, a textbook example of a “V-shaped” recovery.
North American Outlook
By comparison, factories in the U.S. (and Europe) shut down an average seven weeks, and not until March-May.
It took China’s car market just four months to recapture a relatively normal sales volume. Can the U.S. do the same?
LMC thought so earlier this year, when it predicted retail sales would return to the firm’s pre-COVID estimate by September. Now it doesn’t expect that threshold to come until December.
LMC also doesn’t think vehicle production in North America will be back on track—meaning at or above the firm’s pre-pandemic estimates—until October.
China’s quick rebound is encouraging, but it’s no guarantee that other markets can expect to do the same.
In any case, it will take many months to recoup this year’s lost production. LMC’s latest forecast expects worldwide light-vehicle sales will drop 22% to 71 million units this year and recoup only about the shortfall in 2021.
What no analyst can say yet is whether markets will return to their previous trendlines in the next few years or plateau at a lower level.
Outside of a pickup truck, there is no vehicle that’s sold in greater units than the Toyota RAV4. So when they developed the new generation, they had a whole lot to consider.
It’s the fifth generation of a vehicle that has been increasing in sales year after year since its introduction in 1997.
For conducting business in the U.S. market, Toyota has historically had several separate business entities: a sales and distribution company headquartered in California (Toyota Motor Sales, USA); manufacturing operations (Toyota Motor Manufacturing North America); a racing subsidiary (Toyota Racing Development, USA); the Toyota Technical Center for R&D in Ann Arbor; and a design facility in California (Calty Design Research, Inc.). On April 1, 2006, Toyota merged its R&D operations and its manufacturing operations into a single company.