China’s auto market faces slowdown as inventories pile up – CMBI

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SHANGHAI, Oct 19 (Reuters) – Chinese automakers delivered a record number of cars to dealers in the first nine months of the year even as retail demand slowed, setting the market for a downturn in 2023, a report said. a major Chinese brokerage said on Wednesday. .

Automakers delivered 1 million vehicles to dealerships in China in the first nine months of this year, a record volume for the world’s biggest auto market, analysts at China Merchants Bank International (CMBI) said.

In September, shipments to dealers rose 33%, while retail sales rose just 9%, meaning inventory on dealer lots jumped, a trend that could create an overhang that will weigh on sales next year, they said.

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The China Association of Automobile Manufacturers reports on overall vehicle sales.

CMBI analysts used insurance registration data to track retail sales separately from wholesale deliveries to dealerships.

The diverging trend in dealer shipments and retail sales “makes us very concerned about automakers’ wholesale volume in 2023,” the CMBI report said.

“We expect wholesale volume from China to fall in 2023, with a larger decline for internal combustion engine (ICE) vehicles than this year.”

Signs of slowing demand in the Chinese market are emerging as the economy weakens. China’s auto sales growth slowed in September, while electric vehicle sales rose at their slowest pace in five months.

Auto industry officials predict a stronger end to the year as consumers rush to buy cars before government subsidies for electric vehicles and a tax cut for small-engine vehicles expire.

Still, CMBI analysts have warned that 2023 will bring more competition to the electric vehicle sector, saying they expect to see sales growth of electric and hybrid vehicles on a combined basis fall below 50%.

“We believe it may be much more difficult to increase retail prices in 2023 compared to 2022 to maintain margins,” the brokerage said.

CMBI said it believed consensus forecasts for the automaker’s net profit, including that of BYD (002594.SZ), Guangzhou Automobile Group (601238.SS) and Great Wall Motor (601633.SS), risked to exaggerate how the industry would perform in 2023 due to changing market dynamics.

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Reporting by Zhang Yan, Brenda Goh; Editing by Sherry Jacob-Phillips

Our standards: The Thomson Reuters Trust Principles.

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