Incentives rise as domestic demand weakens

Automakers in China have stepped up limited-time purchase incentives in September to boost orders after a sharp year-on-year decline in domestic vehicle sales in August.

China's automobile production and sales totaled 2.68 million and 2.71 million units, respectively, in August, according to the China Association of Automobile Manufacturers. Both figures increased from July, while production fell 4.7 percent year-on-year and sales declined 5.1 percent.

Domestic sales, including passenger and commercial vehicles, fell 24.2 percent year-on-year to 1.7 million, marking the fifth consecutive month in which the decline exceeded 20 percent. Total vehicle exports, by contrast, rose 65.3 percent year-on-year to 1.01 million.

Against that backdrop, more than 10 automakers have introduced or expanded purchase incentives since the start of September, including cash discounts, interest-free financing, insurance subsidies and trade-in incentives.

Tesla said last week that buyers in China who order and take delivery of an in-stock Model 3 sedan or Model Y SUV by Sept 30 can receive cash incentives of 5,000 yuan ($738) and 10,000 yuan, respectively.

Zeekr is offering a 10,000 yuan insurance subsidy on its 8X SUV, together with financing and trade-in options that include a five-year interest-free plan. Xiaomi is offering buyers of eligible SU7 sedans and YU7 SUVs a choice between three-year interest-free financing and a 6,000 yuan insurance subsidy.

Geely is offering trade-in subsidies of up to 20,000 yuan on selected hybrid models through Sept 30. FAW Toyota, meanwhile, is offering an 18,000 yuan cash incentive on the RAV4 SUV through Sept 24, together with additional benefits for eligible trade-ins.

Cui Dongshu, secretary-general of the China Passenger Car Association, said the promotions were short-term efforts to boost sales and reduce inventories during the traditional September-October peak season, rather than the start of a new marketwide price war.

The CPCA's analysis identified price reductions for 10 passenger vehicle models in August, 13 fewer than a year earlier. During the first eight months, the figure was 100 models, 36 fewer than a year earlier.

The average reduction across the 10 models was 38,000 yuan, equivalent to 16.1 percent of their average price. Among the NEV models, the average cut was 45,000 yuan, or 17.8 percent, the analysis showed.

At the retail level, passenger vehicle sales totaled 1.54 million units in August, down 23.6 percent year-on-year but up 5.5 percent from July, according to the CPCA.

The association attributed the month-on-month increase partly to policy support, the Chengdu Motor Show and automakers' sales pushes toward the end of the month.

Retail sales of new energy passenger vehicles totaled 1.01 million units, down 10.1 percent year-on-year but up 5.7 percent month-on-month. NEVs accounted for a record 65.2 percent of domestic passenger vehicle retail sales, up 9.9 percentage points from a year earlier.

The record share came despite the decline in NEV retail sales, as conventional fuel-powered passenger vehicles recorded a steeper year-on-year fall of 40 percent in August.

Passenger vehicle retail sales fell across major brand segments. Sales of Chinese brands declined 19 percent year-on-year, but their share of domestic retail sales rose 4.1 percentage points to 69.9 percent.

Sales of mainstream joint venture and premium brands fell 35 percent and 26 percent, respectively.

The vehicle inventory alert index rose to 62.3 percent in August, up 5.3 percentage points from a year earlier and 1.2 percentage points from July, according to the China Automobile Dealers Association. A reading above 50 percent indicates weaker demand, greater inventory pressure and higher operating risks.

The association said dealers were under strain as new vehicle transaction prices fell below acquisition costs, deepening per-vehicle losses and tightening cash flow. It also cited weak showroom traffic and continued pressure from automakers to take on additional inventory.

Although demand improved slightly from July, business conditions at dealerships deteriorated further in August, the survey showed. The association said the market was expected to recover modestly in September, supported by pent-up demand, new model launches and the traditional peak sales season, but year-on-year pressure would persist.

Cui said rising prices for memory chips, copper and lithium carbonate, together with weaker-than-expected vehicle sales, would make a significant improvement in auto industry profits unlikely in the fourth quarter. He expected domestic passenger vehicle sales during the quarter to be broadly unchanged from a year earlier or to decline by a single-digit percentage.

wangyuchen@chinadaily.com.cn