- Moderate Growth Predicted: S&P Global anticipates that China’s domestic light vehicle sales will experience a slight increase of 0%-2% in 2023-2024. However, the first eight months of this year saw relatively flat sales, and soft consumer sentiment might impede growth in 2024.
- Decelerating EV Sales: The report also forecasts that the growth of domestic electric vehicle (EV) sales in China will decelerate to approximately 15%-25% over the next two years. While sales were up about 30% in the first eight months of 2023, macroeconomic headwinds might slow the growth in 2024.
- Intensified Competition: The competition in China’s auto market is heating up, with local brands gaining traction, especially in the electric vehicle segment. Foreign brands are collaborating with Chinese EV automakers to leverage their production platforms and software capabilities, indicating the likelihood of increased collaboration in the next 12-24 months.
- Pricing Pressure: The report highlights the challenges faced by automakers in terms of pricing. Soft demand is expected to keep the pricing environment unfavorable, and price wars in the electric vehicle segment are likely to persist.
- Overseas Expansion: Chinese auto export growth is likely to decelerate in 2024 due to trade hurdles. An anti-subsidy probe by the EU on EVs imported from China could hinder China’s EV exports after 2024.
- Battery Market Dynamics: The report notes that the pace of battery installations in China is slowing down, and Tier-two battery producers are gaining market share amid intense competition. CATL (Contemporary Amperex Technology Co. Ltd.) continues to be a dominant player in the battery market.
- Material Costs: Moderating material costs, particularly in lithium carbonate prices, could alleviate margin strain for EV producers in the second half of 2023.
- Credit Implications: The report highlights the increased rating downgrade risk for Geely entities, while other companies like Beijing Auto, BAIC Motor, Johnson Electric, and Yanfeng International are expected to maintain stable credit ratings.
The S&P Global report underlines the challenges and uncertainties that China’s auto industry is currently facing, such as macroeconomic headwinds, intensified competition, and potential trade obstacles. It also provides valuable insights into the factors that may impact the industry’s credit ratings in the near future.
Source: China Auto: Soft Demand Heightens Competition | S&P Global
