| 12:22 PM EST

Retail Sales in China Rise 2%

Full-year registrations likely to fall 10%.
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China’s passenger car market bounced back in May with its first monthly gain in 12 months.

Retail deliveries last month climbed to 1.64 million vehicles from 1.60 million a year ago, according to the China Passenger Car Assn., which represents dealerships.

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The uptick is due in part to pent-up demand caused by the coronavirus pandemic that began in China at the end of last year. But even with the boost, CPCA predicts fully-year retail sales in China will come in about 10% below last year, when new-car registrations slid 8%.

Government and manufacturer incentives also have helped boost retail sales. But the coronavirus crisis accelerated a slump in passenger-car sales in China that began two years ago, ending more than 20 years of continual expansion.

Accordion Effect

Much of May’s deliveries involved vehicles that piled up in dealer inventory since the health emergency began. Until those supplies come down to normal levels, dealers are reluctant to place big orders for more vehicles.

That’s why there is a lag between retail sales, which are reported by CPCA, and factory sales to dealers, which are tallied by the China Assn. of Automobile Manufacturers. The latter number is more important to manufacturers, because that’s where carmakers generate revenue.

CAAM reported last month that April wholesales grew 4% to 2.07 million vehicles, mainly because of a 30% jump in demand for commercial vehicles. Dealer demand for passenger vehicles slipped 3%.

CAAM had expected a stronger bounce for wholesales in April. Then it said the expansion would begin in May and build through June. Even so, the group forecasts that passenger-car wholesales this year will drop 15%.

EVs Take a Hit, Again

Meanwhile, China’s market for hybrids and all-electric cars—a group China describes as “new energy vehicles”—continues to lag.

NEV sales in May fell 26% compared to the same month last year. At least that was better than the 49% and 30% drops in March and April, respectively.

Tesla, which opened its first assembly plant in China in January, was the market’s best-selling EV manufacturer in May with 11,100 retail sales. Tesla’s factory outside Shanghai is producing Model 3 sedans and preparing to add the company’s new Model Y, a crossover variant.

Sales of NEVs have been slipping since China’s central government began dialing back its subsidies for such vehicles last July. Demand also has been hurt by the oil glut, which has pushed down the price of gasoline.