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China Auto Sales Poised to Rebound in May From Lockdown Lows

Guangzhou-based XPeng has run double-shift, 24-hour production since mid-May to clear its order backlog.


Domestic new energy vehicle companies such as BYD, Li Auto, Xpeng, Evergrande and Nio are expected to gain from the reduction in vehicle loan rates.
An Xpeng P5 electric vehicle at the Auto Shanghai show in April last year. Auto loan rates have been cut in half in the past two months, from 6% to about 3%. Photo: Reuters.

 

China auto sales are on a recovery track with the first three electric vehicle makers to report numbers for May all seeing strong growth.

Li Auto led the way with sales surging almost 166% to 11,496 from a month earlier as Shanghai gradually eased its lockdown. Xpeng saw sales jump 78% to 10,125 while Nio reported sales up 38% to 7,024.

Auto sales plunged 48% in April from a year earlier, the steepest fall since the Covid pandemic erupted in early 2020.  Showrooms, stores and malls across Shanghai were closed while lockdowns there and in other cities battered supply chains in the world’s second-biggest economy.

“Our parts suppliers, clustered in and around Shanghai, have resumed partial production in May, enabling us to rev up deliveries,’’ said Shen Yanan, president of Li Auto. “But supplies remain tight and we are still some way off the full capacity at our plant in Changzhou’’ in Jiangsu province.

 

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Guangzhou-based XPeng, less dependent on locked down Shanghai for parts, says it’s run double-shift, 24-hour production at its Zhaoqing plant in Guangdong province since mid-May to clear its order backlog.

The strong showing of Li Auto and Nio, both based in eastern China and relying on Shanghai for some parts, is a strong signal that the recovery may be sustained going forward, said Shanghai Soochow Securities analyst Huang Xili.

Resurgent EV demand as consumers emerge from lockdowns will get an additional boost from policy, with Shanghai and other cities planning to cut auto purchase taxes, provide purchasing incentives, and relax licence plate restrictions.

Shanghai will allow an additional 40,000 plate quotas this year, mostly reserved for EVs, with subsidies of up to 10,000 yuan for owners of ICE cars who switch to EVs.

China’s factory activity shrank less sharply in May as some production resumed, but it was still the second-sharpest monthly slump since February 2020, in the initial stages of the Covid pandemic.

By Frank Chen

 

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Frank Chen

Frank Chen is an Asia Financial correspondent who covers China business and finance with a special focus on market indexes. He has a keen interest in real estate, transport, infrastructure and consumer brands. He spends time in Shanghai and Hong Kong and speaks Mandarin, Cantonese, and English.

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