China car sales recover faster than expected as demand picks up

The China Association of Automobile Manufacturers is set to forecast a drop of 10 per cent to 20 per cent in wholesales this year

Buyers are gradually returning to car showrooms, indicating that demand for vehicles are rebounding. AP

Auto makers may recover from China’s slump faster than initially expected, with an industry group revising its 2020 vehicle sales forecast to a less severe drop of potentially just 10 per cent as the coronavirus pandemic eases in the country.

The China Association of Automobile Manufacturers is set to forecast a drop of 10 per cent to 20 per cent in wholesales for this year, a smaller decline than the 15 per cent to 25 per cent it predicted in May, according to a person familiar with the matter. That still would put annual sales in the world’s largest vehicle market at their lowest level since 2014. The person asked not to be identified before CAAM releases its forecast.

While demand has been picking up since the depths of the pandemic at the beginning of the year, challenges still remain as an economic slowdown undermines consumers’ willingness to spend on big-ticket items. Yet buyers are gradually returning to showrooms as the government eases restrictions, adding to evidence that the auto market may be rebounding.

The outbreak exacerbated a two-year decline in car sales in China, with an economic slowdown, trade tensions with the US and stricter emission standards further weighing on demand. Giants such as market leader Volkswagen, Toyota Motor and Tesla have spent billions of dollars building manufacturing plants in China in recent decades.

The revision by CAAM brings its forecast closer to that of another major industry group, China Passenger Car Association, which is projecting a decline of about 10 per cent for this year.

A CAAM representative declined to comment.