Global automakers are pressuring China to ease off the electric vehicle sales quotas in the nation. Associations representing 70% of all global auto production want the EV quotas delayed by one to three years.
Current China regulations maintain that automakers must sell enough EVs or hybrids to generate "credits" equivalent to 8% of sales by 2018, 10% by 2019 and 12% by 2020. Those targets are seen as out of reach for some automobile companies.
The Chinese automobile market has had a steady year so far, with a 1.6% volume increase at the halfway point to follow up on last year's 16% pop. China is by far and away the largest auto market in the world, more than 50% bigger than the U.S. market and more than five times larger than both the Japan and Germany markets.
EVs in China, which run from as high as $200K to as low as $6K, are growing in popularity in cities such as Beijing, Shanghai and Guangzhou that have high gas prices, heavy congestion and unhealthy levels of smog.
Though the number of China/tech/auto JV partnerships is exploding, there are still enough wildcards in the mix to make it tricky business for investors to bet on which companies will prosper in China
Automobile sales in China rose 2.3% in June to 1.83M to break a two-month streak of declining growth. YTD sales through the end of June were up 1.6% to 11.25M, a pace ahead of expectations given last year's 16% jump in sales.
Total vehicle sales in China, which include commerical purchases, rose 3.8% to 13.35M vehicles in the first half of the year.
Japanese automakers (TM, OTCPK:NSANY, HMC) are taking significant market share in China this year, while GM (NYSE:GM), Ford (NYSE:F) and Hyundai (OTC:HYMLF) have lost ground.
What to watch: Automobile demand in China will be heavily influenced in the back half of the year by Beijing's decision on whether a planned tax increase goes forward.
Automobile sales in China rose 8.9% in February to 1.5M units, according to the Passenger Car Association.
The spike is a big reversal from January when passenger vehicle sales fell 9.8%. Though the timing of the Chinese New Year factored into the disparity between the the two months, the strong demand in February could bolster the view that the sales trend stays solid even with a higher tax rate in place.
China says it will tax small cars at 7.5% next year in a move that could put a dent into sales.
The new tax is below the 10% rate which was set to go into effect on January 1, but above the 5% rate that has been supporting demand since October 2015. Auto sales in China are up over 15% YTD.
Domestic Chinese automakers fell today in Hong Kong, led by a 4.47% drop in Geely Automobiles Holdings. GM is down 2.84% premarket, while Ford is 1.17% lower. An anti-trust investigation by Chinese regulators into U.S. automakers is also in the mix today.
Automobile deliveries in China increased 29% Y/Y to 2.27M units in September, according to the China Passenger Car Association. The rate of growth is the highest seen in the region since January of 2013.
Demand in China has stayed strong in front of the expiration of a tax break at the end of the year. The government hasn't tipped off yet if the tax cut will be extended.
Automobile sales are up 15% YTD through the end of September to 16.75M vehicles.
Automobile deliveries in China increased 26% Y/Y to 1.8M units in August, according to the China Passenger Car Association. The rate of sales growth matched the pace from July.
SUV and crossover sales rose 44% to over 654K during the month. Sales of vehicles with engine sizes below 1.6 liters increased 41%. GM, Ford, and Nissan all reported deliveries growth of over 17% for the period. EV sales in China have doubled this year and are on a pace to top 400K for the year.
Demand in China remains strong in front of the expiration of a tax break at the end of the year.
Automobile sales are up 13% YTD through the end of August.
A strong pace of EV sales helped lift net profit at BYD Company (OTCPK:BYDDF, OTCPK:BYDDY) by 38% to 2.26B yuan ($340M) for the six-month period ending on June 30.
Revenue was up 44% to 43.74B yuan during the period.
BYD says "new energy" sales accounted for 35% of the tally. The company expects new energy vehicle sales to double to 120K this year, although a planned scaling down of subsidies from the Chinese government could slow momentum over the next several years if they aren't reversed.
Berkshire Hathaway (BRK.A, BRK.B) holds a 9.89% stake in BYD.
BYD's shares in Hong Kong closed up 2.45% to HKD$52.25.
Automobile deliveries in China soared 26% Y/Y to 1.6M units in July, according to the China Passenger Car Association. The pace of sales was the highest in over 40 months, although it came against a weak comparable from a year ago.
Car deliveries in China are up 11% since the government lowered the tax on small vehicles to 5%.
Demand for SUVs and crossovers remained strong, with deliveries up 47% to over 580K. Domestic automakers posted strong growth during the month, led by Guangzho Automobile (+37%), Geely Automobile Holdings (+72%), and Great Wall Motors (+49%).
EV watch: A new proposal in China aims to boost EV sales by forcing automakers to produce more electric cars or purchase carbon credit offsets from peers. If Beijing grants final approval, the new rules will replace direct subsidies that are set to expire by 2020. On the production front, LeEco announced plans this week for a $1.8B plant in China capable of producing 400K electric vehicles a year. The online video giant is also a backer of Faraday Futures, the somewhat mysterious EV startup out of California. In Japan, execs with Toyota and Nissan continue to drop hints on a strategy to focus on cheaper EVs.
A government-owned Shenzhen bus operator canceled the majority of a 1.8B yuan ($269M) contract with a subsidairy of BYD (OTCPK:BYDDF, OTCPK:BYDDY) for electric buses. The Shenzhen Transportation Research and Design Institute cited a "capacity adjustment" as the reason.
The announcement came after the Hong Kong and Shenzhen stock markets closed for the day.
Automobile industry heavyweights are gathered in Beijing ahead of next week's major auto show. Many of the side interviews with exec are as revealing as the model reveals.
Ford (NYSE:F) CEO Mark Fields is on the scene. He has already tipped to reporters that the automaker isn't interested in a merger with Fiat Chrysler Automobiles (NYSE:FCAU). Last week, Fiat CEO Sergio Marchionne teed up Toyota (NYSE:TM), Volkswagen (OTCPK:VLKAY), and the Blue Oval as the only remaining potential merger partners left in the industry.
This year's event takes on added significance with local manufacturers increasing market share in China. During Q1, the top five selling models in the high-margin SUV category were all made by Chinese companies.
Automobile sales are expected to rise 7% in China this year, aided by a tax break on purchases. Some analysts think that demand will fall flat next year.
Another key topic will be the supply chain disruption due to the earthquakes in Japan. Most of the majors have been affected by the natural disaster.
Models being showcased next week at the Beijing Auto Show include the Acura CDX, Audi TT RS, Chevrolet FV2030, Jaguar XFL, and the all-electric LeEco.
The LeEco is made by the Chinese parent company of EV player Faraday Futures. Though there's plenty of room in the China EV market for LeEco, Tesla Motors, and others - a Bloomberg report this week indicated that EV sales numbers out of China can't be trusted.