China's passenger car sales up 1.4% in 2017; while NEV sales increased by 53%

According to the data from China Passenger Car Association, China produced 2.32 million units of passenger cars in January, up 12.7% from January 2017. The volume, however, was 10% lower from output seen in December. Passenger Car Sales in January amounted to 2.25 million units, up 6% year on year but down 19% month on month. New-energy vehicles accounted for 30,000 units.

China is the world's largest auto market currently and also the fastest-growing market for New Energy Vehicles (NEV) because of government's preferential policies to boost clean energy use to curb pollution. The CPCA expected passenger vehicles sales to grow by about 4 per cent in 2018.

As observes by Forbes, after 15 years of high-growth period, China’s auto industry began to transition in 2017 to a stage where growth is likely to be steady -- but much slower in percentage terms.

In 2017, the industry grew at a much slower pace of 3% when China’s auto industry increased by almost 900,000 vehicles, even at the lower growth rate to sell about 28 million vehicles. According to vehicle type, 2017, China sold 24.7 million passenger cars and 3.7 million trucks while producing 24,807,000 units of passenger cars. Production and sales were up 1.6% and 1.4% year on year, 1.6 percentage points lower than the overall growth of automobiles. Within the passenger car category, SUVs accounted for 42% of the total, growing by a healthy 13%. The rates of contribution to the overall growth reached 85.5% and 85.6% respectively, 1.3 percentage points and 1.4 percentage points lower than that of last year.

China continued its global leadership position in the sale of NEVs. Sales of NEVs increased by 53% to 777,000 in 2017, a figure which is excluding  the 1.3 million low-speed electric vehicles that are growing popular in China’s Tier 2 and Tier 3 cities. By comparison, the United States, the world’s second-largest auto market, sold less than 200,000 NEVs last year.

In September 2017, China announced new rules with respect to NEVs that essentially shifted the subsidy burden of NEV development from the government to the car companies. Electric vehicles (EVs) represent the largest segment in NEVs.

In September, China’s Ministry of Industry and Information Technology announced a Temporary Management Regulation for Corporate Average Fuel Consumption (“CAFC”) and New-Energy Vehicle Credits. These were designed to improve the fuel efficiency of traditional-fuel vehicles, as well as to promote NEVs in China. New rules would require automakers to produce fleets with a corporate average fuel economy of 42 miles per gallon (mpg) by 2020, and 54.5 mpg by 2025.

New regulations will compel automakers to make lighter cars without compromising on size. From a performance standpoint, lighter vehicles have better driving performance with lesser fuel consumption and the weight savings can be transferred into payload capacity. When accessories add extra weight, the automaker needs to take weight out from the body and engine components. Aluminium comes handy in lightweighting both traditional-fuel vehicles and NEVs. In body-in-white applications, aluminium will have an advantage. To achieve a high range for NEVs within a given battery size and weight, the car needs to be lightweight made of lighter materials like aluminium or a carbon fibre.  All these factors are expected to boost automotive aluminium demand in China.