April car sales in China fell less than expected last month and analysts said May and June would likely be much stronger because of the Chinese new car credit program.
This month’s increase in car sales is a “dead cat bounce” from large disruptions caused by the Chinese government’s adoption of a credit program that prioritizes cash payments over trade financing for purchases of new cars, analysts said, citing data released Monday by China’s auto sales data body.
“This month’s return to growth is a little more representative of demand and reflects a correction in the large revisions to our numbers,” Moody’s Analytics Chief Economist Mark Levinson said. “We think this is not the signal of a new normal.”
Sales of cars rose 0.5 percent in April from a year earlier, reversing a drop in March and ending three months of declining sales that would have been the worst in more than three years.
The National Industry Association of Automobile Manufacturers reported that 48.5 million cars and light commercial vehicles were sold in China in the first four months of this year, compared with 47.7 million in the same period of 2018.
General Motors and Fiat Chrysler Automobiles both said that their sales fell in China last month as consumers put off purchases for big-ticket items until the new car credit program kicked in.
Fiat Chrysler Automobiles saw its China sales decline 6.6 percent to 284,600 vehicles in April from a year earlier. GM sold 415,190 vehicles in China in April, down 2.1 percent from a year earlier. Ford Motor’s sales in China dropped 12.1 percent to 76,805 cars in April.
Levinson said April’s uptick in Chinese car sales would likely “worsen” in May and June as people used May credit and got used to the new system. But he expects sales to come in at the high end of last year’s 9.4 million unit figure for all of 2019.
With China’s newly adopted auto credit program, consumers are now allowed to purchase cars outright for up to 15 percent of their value, or else they can apply for credit for up to 50 percent of the value, up from 20 percent.
Credit totaled 74.0 billion yuan in April, up a fifth from a year earlier, according to the China Association of Automobile Manufacturers. “This reflects the growing availability of car credit and supports robust demand in the new car market,” it said.
In January, the China government announced its new car credit program to encourage more people to buy cars. Officials chose the scheme after Chinese automakers complained that the country was struggling to sell enough new cars, particularly electric vehicles, and that the lack of a credit scheme had contributed to the sell-off in auto stocks last year.