China’s auto sector revives on strong demand for trucks, vans

Auto sales in China rose 11.6% in June from a year earlier to 2.3 million units, driven largely by strong demand for trucks and vans as Beijing ramps up infrastructure spending to revive the economy.

In a further sign the world’s largest auto market is recovering from coronavirus lockdowns, auto wholesales in June rose for the third straight month to 2.3 million units, according to data from the China Association of Automobile Manufacturers (CAAM), the country’s largest auto industry body.

Sales of trucks, vans and other commercial vehicles, which constitute for around a quarter of overall market, surged 63% on-year, while sales of passenger vehicles rose only 1.8%.

“The sales of trucks were driven by investment, and they were strong in past months, which was a precursor to the recovery of economic activity,” said Yale Zhang, head of Shanghai-based consultancy AutoForesight.

Overall auto sales growth also was helped by supportive local government, said CAAM official Chen Shihua.

“After local consumption promotion policies expire, market demand may also decline.”

June’s jump in overall sales follows a rise of 14.5% in May and 4.4% in April, before which sales had languished in a nearly two-year slump. Sales of commercial vehicles jumped 48% in May and 32% in April.

Automakers such as Geely Automobile Holdings Ltd, Great Wall Motor, Tesla Inc and Ford Motor Co reported sales growth in China in June.

However, sales of new energy vehicles (NEVs) fell for the twelfth straight month, to 104,000 units. NEVs include battery-powered electric, plug-in petrol-electric hybrid and hydrogen fuel-cell vehicles.

Despite recent signs of improvement, China’s auto sales are expected to fall by 10%-20% for the year as a whole due to their earlier collapse, from over 25 million units sold in 2019, CAAM said last month.

Meanwhile, The yuan pulled back from a four-month high against the dollar on Friday as China’s stock market rally ran out of steam, but the currency remains on course for its strongest weekly performance since at least January.  By midday, spot yuan was changing hands at 7.0037 per dollar, 113 pips weaker than the late session close.

That was despite the People’s Bank of China (PBOC) setting the midpoint of its daily trading band at 6.9943 per dollar, the strongest since March 12.

The currency weakened past the closely watched 7-per-dollar level it had breached a day earlier on the way to its strongest close since March. The offshore yuan also weakened to trade at 7.0065 per dollar around midday.

The yuan has gained around 0.8% this week, powered by strong foreign investment flows into China’s stock market, with investors chasing an officially sanctioned bull market that has driven the country’s benchmark index to five-year highs.

That rally paused on Friday, with the Shanghai Composite index 1.05% lower by midday. “The recent large gains in the domestic stock market and yuan appreciation are clearly chained together,” analysts at China Construction Bank said in a note Friday, also noting renewed support for the dollar given a rise in risk aversion in global markets Thursday.

Reuters