Sustained boom

Compared to the moderate growth in September last year, this year's “golden September” has seen a “strong” increase.

According to the Passenger Car Market Information Joint Meeting of the China Automobile Dealers Association (hereinafter referred to as the “PCAD”), from September 1 to 22, the retail sales of passenger cars in the market reached 1.243 million units, representing a year-on-year increase of 10% and a month-on-month increase of 10%. The PCAD predicts that the total retail market size of narrow-sense passenger cars in September will be approximately 2.1 million units, up 4.0% year-on-year and 10.1% month-on-month.

The PCAD noted that the national scrapping and replacement policies, as well as local trade-in policies, have steadily contributed to driving the growth of the auto market. Coupled with the festive effects of the Mid-Autumn Festival and National Day, the auto market experienced rapid growth in September, with the “golden September” period yielding significant results. It is reported that since August, the number of scrapping and replacement subsidy applications has grown rapidly, and the number of subsidy applications in September remained high. Currently, many provinces/cities in China have issued and implemented auto replacement subsidy policies, with individual vehicles eligible for subsidies of up to RMB 18,000 for replacement and renewal.

According to information from the press conference of the National Development and Reform Commission (NDRC) on September 25, as of September 24, the total number of subsidy applications approved by the national scrapping and replacement platform corresponded to a scale of government bond fund expenditures approaching RMB 11 billion. Among them, as of September 23, Beijing had accepted 23,000 applications for the scrapping and replacement of cars, driving automobile sales of approximately RMB 6 billion. Cui Dongshu, Secretary-General of the PCAD, analyzed that the successive release of replacement policies in various provinces in September significantly alleviated the wait-and-see attitude towards price wars and promoted new car consumption. The incremental potential of new energy products was higher than historical expectations, particularly in the entry-level market, where demand for higher-quality replacements and upgrades at the same price point has been effectively stimulated. It is expected that the initial effects of local subsidy policies will undoubtedly be positive, further boosting sales during the “golden September and silver October” period.

Favorable policies

Since the beginning of this year, a “combination punch” of favorable policies has continuously stimulated auto consumption demand. In April, the Ministry of Commerce and six other departments issued the "Detailed Rules for the Implementation of the Auto Scrapping and Replacement Subsidy Policy." In July, the official website of the NDRC announced that the NDRC and the Ministry of Finance had issued the "Several Measures to Strengthen Support for Large-Scale Equipment Replacement and Consumer Goods Scrapping and Replacement," which proposed increasing the subsidy standard for auto scrapping and replacement. Specifically, the subsidy for scrapping eligible old vehicles and purchasing new energy passenger cars was increased from RMB 10,000 to RMB 20,000, while the subsidy for eligible gasoline-powered passenger cars was increased to RMB 15,000.

Cui Dongshu stated that the introduction of the national scrapping and replacement policy, along with the government's commitment to bearing approximately 90% of the scrapping and replacement subsidy costs, serves as an excellent model for promoting consumption, guiding localities to implement corresponding scrapping and replacement incentive policies and promptly issue detailed implementation rules.

Since the end of August, detailed rules for scrapping and replacement have been successively issued in various regions. Twenty-four regions, including Chongqing, Beijing, Tianjin, Shanghai, and Jiangsu, have also issued policies to support auto replacement and renewal, with subsidies of up to RMB 18,000 available for replacements and renewals.

Image source: Thalys

With the support of the scrapping and replacement policy, auto sales in many regions have increased significantly. Taking Chongqing as an example, since the implementation of a new round of auto scrapping and replacement support policies on August 20, nationwide sales of Changan and Thalys, two local auto manufacturers in Chongqing, have increased by 39.4% and 59.8% month-on-month, respectively. Sales of BYD, Chery, and Li Auto in Chongqing have also increased by 29.4%, 30.2%, and 44.3% month-on-month, respectively.

“The national policy to strengthen support for consumer goods scrapping and replacement has effectively stimulated the vitality of Chongqing's auto consumption market,” said Gao Jian, Party Secretary and Director of the Development and Reform Commission of Chongqing, at a special press conference held by the commission on September 25. From January to August this year, the number of passenger cars in the city increased by 8.72% year-on-year, with new energy vehicles increasing by 55.08% year-on-year.

Ai Xuefeng, Director of the Guangdong Provincial Development and Reform Commission, also stated at the meeting that since the implementation of the reinforcement policy in August and up to September 22, nearly 30,000 vehicles had been scrapped, replaced, or renewed in less than a month, achieving positive results.

A research report from Guoxin Securities noted that as of 12:00 p.m. on September 22, the Ministry of Commerce had received over 1.1 million auto scrapping and replacement subsidy applications. The NDRC predicts that 2 million low-emission vehicles will be phased out this year. With over 300 million vehicles in China, the scrapping and replacement policy can gradually improve the energy efficiency of existing products, reduce energy consumption, and lower carbon emissions. This will help expand domestic demand and promote the realization of China's “dual carbon” goals and comprehensive green transformation of the economy and society.

Significant growth

According to data from the PCAD, from September 1 to 22, retail sales of passenger cars in the market reached 1.243 million units, up 10% year-on-year and 10% month-on-month. Cumulative retail sales of automobiles since the beginning of the year have reached 14.709 million units, up 3% year-on-year. In terms of wholesale, nationwide passenger car manufacturers wholesaled 1.373 million units, up 5% year-on-year and 31% month-on-month, with cumulative wholesale sales of 17.313 million units since the beginning of the year, up 4% year-on-year. Specifically, from September 1 to 22, the new energy vehicle market retailed 664,000 units, up 47% year-on-year and 7% month-on-month, with cumulative retail sales of 6.673 million units since the beginning of the year, up 36% year-on-year.

A research report from China Galaxy Securities noted that from the retail perspective, retail sales increased significantly in early September, marking a good start to the “golden September and silver October” period, and local replacement subsidy policies began to gradually show their effects. From the wholesale perspective, amid fierce market competition, manufacturers and terminal dealers are still actively destocking, with wholesale volumes lower than retail volumes. The gradual increase in retail sales is expected to boost manufacturers' and dealers' confidence, driving a subsequent recovery in wholesale volumes.

Cinda Securities' research report also mentioned that starting in September, automakers have gradually entered a period of intense new product launches, primarily targeting the concentrated consumer demand during the “golden September and silver October” period.

Specifically, September saw a significant number of new car launches, making it a particularly lively month. According to incomplete statistics, in the first three weeks of September alone, 40 to 50 new car models were launched or made available for pre-sale. Meanwhile, to seize the window of opportunity presented by the replacement policy and drive consumers to replace their vehicles, many automakers have actively responded by offering factory subsidies combined with various cash incentives, essentially offering the most substantial discounts to boost sales. It is reported that compared to last year, this year's passenger car promotions are 5% to 7% higher than the same period last year, further stimulating consumer willingness to purchase.

Image source: SAIC Volkswagen

Taking SAIC Volkswagen as an example, the limited-time one-price offer for the all-new Passat starting at RMB 159,900, combined with a lifetime warranty on the powertrain, instantly ignited enthusiasm in the B-class sedan market. Subsequently, Dongfeng Nissan launched the Teana with a limited-time price of only RMB 127,800. These two models have long been “evergreen” in the RMB 200,000 price range, and the breakthrough in price thresholds underscores the difficult situation facing joint venture brands and their determination to “trade volume for price.” The current situation indicates that the low-price strategy is indeed effective. Data shows that in August, sales of the Passat family reached 21,800 units, and cumulative sales of the Passat family exceeded 148,000 units in the first eight months of this year, regaining its industry-leading position. The PCAD analyzed that the influx of cost-effective models brought about by technological upgrades, combined with the implementation of consumption promotion policies, will effectively unleash the demand of early car buyers who are transitioning from “having a car” to “having a good car,” driving healthy growth in consumption upgrades.

“Our internal market forecasting team's pre-month optimism for the September passenger car market was 63%, and the post-month satisfaction assessment at the beginning of September was 67%. Currently, optimism for the September market has reached 93%, the highest market optimism point in recent times,” said Cui Dongshu. Since there was no early holiday at the end of September this year, the effective sales period for September was longer. The effects of this year's “golden September” will be more pronounced, contributing to increased sales.

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