Preliminary numbers indicate auto sales in China rose in June, reversing course for the first time in a year.  Sales rose a reported 4.9% in June.  As previously discussed on the blog, sales in China have been in a downward trend since last summer.

Analysts attribute the rise to aggressive discounting by dealers in China.  One of the underlying reasons for the discounts is an attempt by dealers to clear their lots of cars that do not meet new stricter emissions standards.  The rules, which were originally slated to take effect in July 2020, have been pulled forward to this month in at least 15 cities, creating a rush to comply with the emissions standards.  Dealers lamented that buyers did not want to buy the vehicles certified to the prior emissions standards, unsure of how long they would be able to drive the vehicles.  However, the steep discounting must have worked, given the surge in vehicle sales in June.  Reports indicated discounts as big as 50% to entice buyers to the dealers.

The new standards require cuts of 30% to emissions.  The cities that have pulled the standards forward account for two thirds of car sales, so the timeline acceleration has required a significant shift in car sales.

Although auto sales as a whole rose, US automakers continued to face rough patches in China.  Ford continued its slide of auto sales in China.  Second quarter sales fell 21.7%, far less than the 35% fall in the first quarter.  

As new emissions vehicles (NEVs) hit the lots, the fate of China’s auto market remains in the air.  However, the full year outlook continues to indicate a down year overall for the auto industry in China.