In China, automobiles are classified into passenger vehicles and commercial vehicles. Passenger vehicles include basic passenger vehicles (sedans), MPV, SUV and cross passenger vehicles (including mini vans and light buses with less than 9 seats). In recent years, passenger vehicles have become an integral part of China’s automobile industry. The production volume and sales volume account for over 80% of all of China’s automobiles. In 2016, the production volume and sales volume reached 24.421 million and 24.377 million, increasing by 15.5% and 14.9% over 2015, respectively.
According to CRI, vehicles with of mid to small engine displacements are the most popular among consumers due to fuel efficiency concerns. The market is heavily influenced by policies. For example, in the second half of 2010, the Chinese government launched “Project of Energy-Saving Products Benefiting the People” to promote sedans with no more than 1.6L displacement. People who buy automobiles which were among the first to be included in the energy-saving automobile catalogue were granted subsidies of 3000 CNY/vehicle, significantly pushing sales volume to go up.
From 2012 to 2013, the encouraging policies for energy-saving vehicles and preferential vehicle and vessel tax policies for energy-saving and new-energy vehicles enabled the stable growth of the market and the increase in the growth rate of the sales volume. In 2013, the sales volume of passenger vehicles with 1.6L or below displacement was 11,923,700, increasing by 14.73% YOY and accounting for 66.51% of the passenger vehicle market. In 2016, the fast growth of the sales volume of passenger vehicles in China also benefitted from the half-reduction of the purchase tax on passenger vehicles with 1.6L of below displacement.
Since 2014, the Chinese government has issued a number of subsidiary policies for new-energy automobiles. Implementation Plan for Government Agency and Public Institutions’ Purchase of New Energy Vehicles issued in July regulated that from 2014 to 2016, at least 30% of automobiles purchased by government agencies should be new-energy vehicles and the proportion should be increased year by year. Announcement on the Exemption of Purchase Tax from New Energy Vehicles, which was published in August, announced that on September 1, the reduction or redemption of purchase taxes on new-energy automobiles (equivalent to 10% discount) would be implemented. It was also announced that the first group of the Catalogue of the Models of Energy-Saving and New Energy Automobiles Entitled to Vehicle and Vessel Tax Reduction or Exemption would be published at the end of August. Driven by these policies, government subsidies lowered the cost for consumers to purchase cars, stimulating the demand for new-energy automobiles.
Overall, automobile reserves in the first and second tier cities are higher and upgrading demand will be the major demand. In the third and fourth tier cities, automobile reserves are small and have huge room to grow.