Carmakers in China delivered a million cars to dealers in the first nine months of this year – a record number, but a local brokerage said on Wednesday the market looks set to slow down in 2023 as demand is softening.
Analysts at China Merchants Bank International (CMBI) said deliveries to dealers rose by 33% in September, but retail sales climbed only 9%.
That means inventories on dealer lots jumped and could create an overhang that will weigh on sales next year, they said.
The China Association of Automobile Manufactures reports overall vehicle sales.
CMBI analysts used insurance registration data to track retail sales separate from wholesale deliveries to dealers.
The diverging trend in deliveries to dealers and retail sales “makes us very concerned about automakers’ wholesale volume in 2023,” the CMBI report said.
“We expect China’s wholesale volume to fall in 2023, with more significant decline for internal-combustion engine (ICE) vehicles than this year.”
Signs of softening demand in China’s market emerge as the economy weakens. China’s auto sales growth slowed in September while EV sales rose at their slowest pace in five months.
Rush to Buy Cars Before Subsidies End?
Auto industry officials have forecast a stronger end to the year as consumers rush to buy cars before government subsidies for electric vehicles and a tax cut for small-engine vehicles expire.
Still, CMBI analysts warned 2023 would bring more competition to the EV sector, saying that it expected to see sales growth for EVs and hybrids on a combined basis to drop below 50%.
“We believe it could be much more difficult to raise retail prices in 2023 vs 2022 to maintain margins,” the brokerage said.
CMBI said it believed that the consensus forecast for automaker net profit, including that of BYD, Guangzhou Automobile Group and Great Wall Motor was at risk of overstating how the industry would perform in 2023 because of the shifting market dynamics.
- Reuters with additional editing by Jim Pollard