(ATF) Auto sales grew in China last month, led by light commercial vehicles as a surge in online sales during the coronavirus epidemic stoked demand for delivery vehicles.
Courier companies’ need for vans helped push the inventory warning index of China's automobile dealers to 56.8% in June, up 2.6% month-on-month and 6.4% higher than the same period last year, according to the latest data released by the China Association of Automobile Manufacturers (CAAM).
The association said it is estimated that China's automobile sales in June will have increased 4% on May and 11% annually to 2.28 million vehicles, the third consecutive month of year-on-year growth.
Haitong Securities said that growth in June was mainly driven by commercial vehicles. With the economic recovery, domestic freight demand is increasing, and commercial vehicles such as light trucks have benefited from it.
E-commerce firms including Alibaba saw trade climb in the first half of the year as tens of millions of consumers locked in their homes to halt the spread of coronavirus turned to online delivery services for food and other purchases. Analysts expect the increase to sustain after lockdowns were lifted.
The trend was particularly felt in rural areas, where more than 87,000 online enterprises were registered in the year to June, up 13.6% from a year ago, and 8,000 companies added e-commerce channels to their sales strategies.
READ MORE: E-commerce transactions surge to 34tn yuan
Transaction volumes within the second-hand car market also climbed, with 1,172,900 vehicles sold in June. That represents a 5.34% month-on-month increase and a 1% annual climb. It was the first monthly growth notched up this year and the accumulated transaction amount reached 72.7 billion yuan ($10.2bn).
Analysts forecast that the damping effect of the coronavirus on public and mass transport would stimulate future car sales growth.
"COVID-19 will encourage private transportation over the long term... and likely structurally change the marketing and distribution practices of the auto industry,” wrote UBS analysts led by Paul Gong. The bank forecasts continued single-digit growth for the sector through the rest of 2020.
"Within the market, we believe the premium segment and Japanese brands will continue gaining market shares, and companies that quickly responded to the new consumer needs (eg, adding advanced air filtering functions) are better positioned for the recovery."
Geely sales climb
China’s biggest manufacturer, Geely Automobile, saw sales volumes climbed 1% last month to 110,129 vehicles compared with May – a 21% year-on-year increase, the company said.
That pushed total first-half sales to more than 530,000 units, according to data released by Geely Monday.
Rival high-end brand Lingke Automobile sold 13,214 vehicles in June, a 2% increase on May and 53% higher than last year. That’s the third consecutive month of double-digit growth and sets the highest monthly sales performance of the past seven months.
Since April, Geely's automobile sales have continued to grow positively.
From January to June, the total sales volumes were 530,446 vehicles, achieving 38% of the annual sales target of 1.41 million vehicles and ranking first in sales of Chinese brand passenger cars. According to the announcement, the sales data has not been audited.
Car dealerships are less optimistic. Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, warned that sales outlets faced a barrage of headwinds last month.
Dealers will lower prices as an oversupply of new vehicles come online, sparking fierce price competition, Lan said. Profits from bicycle sales, a usually lucrative side business for many salesmen, will also fall and the rising cost of imports and sales will eat into dealer's earnings, he added.