Under the normal situation of "chips", some car companies are happy and some are sad

Affected by the aggravation of the chip shortage, as of July, automobile production and sales have declined for three consecutive months year-on-year. However, for domestic brands, the past seven months have been a rare opportunity to demonstrate their comprehensive strength and exclusive advantages. Not only has sales been rising, but the market share of passenger cars has also increased unprecedentedly, reaching 42.6%, an increase of 6.5 percentage points over the same period last year. At the same time, the export volume of Chinese automobile companies hit a new record in July, and the cumulative export volume this year has exceeded 1 million units. In addition, the production and sales of new energy vehicles led by Chinese automakers have also set new historical records. In contrast, the performance of joint venture brands is not satisfactory. In July, the year-on-year sales decline of many mainstream joint venture automakers exceeded 1 times the overall decline of passenger cars. As more and more joint venture brands join the list of production cuts and suspensions, the uncertainty of their future has also increased.

Supply exceeds demand, automobile production and sales fall for three consecutive years

Recently, the resurgence of the epidemic in some parts of the country and the frequent extreme weather have added some pressure to the automobile market, which is already in the off-season. However, compared with this, the increasingly tight chip supply is the real difficulty faced by automakers, which has also directly lowered the production and sales performance of the automobile market in July.

According to the latest statistics from the China Association of Automobile Manufacturers, automobile production and sales in July were 1.863 million and 1.864 million, respectively, down 4.1% and 7.5% month-on-month, and down 15.5% and 11.9% year-on-year. Among them, passenger car production in the month was 1.548 million and sales were 1.551 million, down 0.5% and 1.1% month-on-month, and down 10.7% and 7.0% year-on-year. Although this is the third consecutive month this year that the passenger car market has seen both production and sales decline both month-on-month, the decline has narrowed compared to last month. However, it is worth noting that the imbalance between the supply and demand of passenger cars remains unresolved.

In fact, this trend has already begun to emerge since April this year. According to public data from the China Association of Automobile Manufacturers, although the production of passenger cars in that month was higher than the terminal sales, the year-on-year growth rate was far lower than the market performance. This gap is increasing with the intensification of chip supply shortage. Putting aside the two special months at the beginning of the year, as of now, the gap between the year-on-year decline in production and sales in July is the largest, reaching 3 percentage points.

Specifically speaking of different models, the SUV, which has always been a best-seller, was the first to be affected, and production obviously could not keep up with market demand. According to statistics from the China Association of Automobile Manufacturers, in July, the national SUV sales volume was 724,000 units, while the corresponding production volume was only 707,000 units, a year-on-year decrease of 6.2% and 11.7% respectively. In the sedan market, which has a similar share, the production and sales volume in July reached 726,000 units and 711,000 units respectively, a year-on-year decrease of 10.7% and 7%. In contrast, MPV performed more firmly and was the only model in the passenger car category to achieve positive month-on-month growth.

Chip shortage will ease as soon as next month

Regarding the continuous decline in the auto market over the past three months, Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, said that it was completely expected, and under the current conditions, the next few months will continue to have negative growth, but the decline will be narrowed and is expected to remain within -7%. Even so, this will not affect the expectation of positive growth in sales in 2021. You know, even though passenger cars have been declining for the past three months, overall, sales from January to July still reached 11.56 million units, a year-on-year increase of 21.2%.

As for why the auto market has experienced a continuous decline, Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, analyzed that, on the one hand, the production and sales base in the same period last year was relatively high, and on the other hand, the impact of chip shortages continued to increase.

"The main reason is the insufficient supply and relatively low inventory of companies. We originally predicted that the shortage of automotive chips would be alleviated in the second half of this year, but we did not expect the increasing overseas epidemic, especially the surge in the number of confirmed cases in Malaysia, which forced local chip factories to suspend operations and reduce production, which had a new round of impact on my country's automotive industry supply chain. Of course, chip shortages are an objective fact, but there are indeed some dealers who hoard goods and take the opportunity to increase prices for huge profits, resulting in structural shortages in chip supply. The good news is that the national level has noticed these problems and is conducting an investigation. I believe that with the intervention of relevant administrative departments, the chip market will be regulated, which will alleviate the impact of chip shortages to a certain extent." Chen Shihua predicts that the chip shortage will be initially alleviated as early as September this year.

Cui Dongshu, secretary general of the China Passenger Car Association, also holds the same optimistic outlook. In his view, the global automobile supply and demand gap pressure is relatively large after the epidemic situation improves, and the insufficient and uncertain international chip supply has also caused production cuts and losses to some Chinese automakers, but these effects are only temporary. He believes that with the acceleration of the expansion of domestic related supply chains, the shortage of automotive chips in September will be alleviated to a certain extent.

The share of counter-trend growth increased by 11 percentage points

Although there are many pessimistic expectations in the industry about the negative impact of the shortage of chips, it must be mentioned that from January to July, China's independent brands performed well. Even though the overall market continued to decline, they still maintained an upward trend and their market share also continued to rise.

According to statistics from the China Automobile Association, in July, domestic brand passenger cars sold 720,000 new cars, up 4.1% from the previous month and 22.2% from the previous year, accounting for 46.4% of the total passenger car sales, up 2.3 percentage points from the previous month and 11.1 percentage points from the same period last year. Among them, the market share of Chinese brand sedans, SUVs and MPVs has increased to 32.6%, 55.0% and 67.5% respectively, with both month-on-month and year-on-year growth.

Looking at the first seven months, a total of 4.92 million Chinese-branded passenger cars were sold, a year-on-year increase of 42.8%, accounting for 42.6% of the total passenger car sales, and the market share increased by 6.5 percentage points over the same period last year.

Among them, the ranking of the top 15 companies in terms of sales from January to July remained unchanged from the first half of the year, especially Chery, BYD, Changan, Geely, FAW and other established auto groups, as well as new forces such as Ideal, Xiaopeng, and Hozon, with outstanding performance, with sales growth of more than 50% year-on-year. Except for BAIC, the sales growth of the other 14 domestic brands in the first seven months all outperformed the market.

In addition, in July, my country's auto exports hit a new high, with 174,000 new cars exported in a single month, up 9.8% from the previous month and 1.8 times from the previous year. Among them, 140,000 passenger cars were exported, up 2.1 times from the previous year, and new energy vehicles contributed 31.5% of the export share. Based on the overall export situation from January to July, my country's auto exports have exceeded 1 million units, up 1.2 times from the previous year, with passenger cars accounting for nearly 80%, of which domestic brands are the absolute main force.

New energy vehicles with plenty of power are selling well in the off-season

Analysts believe that the reason why Chinese independent brands can continue to grow against the trend is closely related to the improvement of their own product competitiveness, the relatively stable supply chain, and the effective overcoming of the negative impact of chip shortages. In addition, another key factor is the substantial increase in sales of new energy vehicles.

We can see that in recent years, Chinese automakers have been concentrating their respective advantageous resources, seeking to enhance brand and product power in multiple dimensions, and actively deploying in the new energy vehicle market. And the facts have also proved that these efforts have begun to bear fruit. Whether it is the Hongqi brand under FAW Group, or the "China Star" series and Lynk & Co brand of Geely Automobile, the Tiggo 8 and Arrizo 5 gold combination series of Chery Automobile, or the Changan UNI series and the Tank brand under Great Wall Motors, they not only have eye-catching market performance, but also have stronger and stronger product appeal. However, no matter how good the performance of traditional fuel vehicles is, they cannot compete with the growth of new energy vehicles.

Statistics from the China Association of Automobile Manufacturers show that in July, the new energy vehicle market showed the characteristics of "high sales in the off-season", with production and sales continuing to grow both month-on-month and year-on-year, and both hitting historical highs, reaching 284,000 and 271,000 units respectively, up 14.3% and 5.8% month-on-month, and 1.7 times and 1.6 times year-on-year respectively.