In news that will further encourage lithium and other metal suppliers, Chinese sales of so-called New Energy vehicles (NEVs) hit an all-time high in August, even as sales of conventionally powered vehicles slowed slightly in the month.
At the same time the share of total monthly passenger vehicle sales in August hit its highest level ever.
Car sales in China jumped 32.1% year-on-year to 2.38 million units last month, accelerating from a 29.7% rise in the previous month, data from the China Association of Automobile Manufacturers showed.
It was the third straight month of increase in car sales, boosted by government incentives to support the industry.
In fact, thanks to subsidies and tax breaks the Chinese car industry – appears to be the healthiest and best performing part of the stuttering Chinese economy at the moment because of high demand for NEVs in particular.
Sales of new energy vehicles, which include pure electric vehicles, plug-in hybrids and hydrogen fuel-cell vehicle surged more than 100% from August 2021.
While all car sales rose 1.7% in the first eight months of 2022, they were down 1.5% in August from July as power restrictions affected production of automakers and China’s longest and most intense heatwave and Covid restrictions in some areas reduced customer visits to showrooms.
China’s NEV sales totalled 632,000 units in August, more than in any previous month. Sales topped 500,000 in June and July of this year and last December.
Battery-electric vehicles (traditional EVs) continue to account for the vast majority of NEV sales in China, with 490,000 new BEVs sold in August compared to 142,000 PHEVs (Plug-in Hybrids EVs)
The record was notable as well because Chinese analysts say August (mid-summer) is usually a low month for vehicle sales.
August’s sales were up 12% from July and 108% from August 2021 when 304,000 units were sold (a record at the time).
China’s Car Association says that so far this year wholesale sales of NEVs totalled 3.662 million units, up 119% year-on-year and on track to reach 6 million.
Traditional EVs (Battery-powered) dominated NEV sales in August.
The 490,000 units sold represent about three-quarters of all NEV sales. Plug-in hybrids accounted for 142,000 units last month, while fuel cell vehicles continue to sell in very low numbers. Of the 2.097 million wholesale passenger sales last month, NEVs accounted for 30.1% of sales last month, the first time NEVs have topped the 30% share level.
The China Passenger Car Association (CPCA) attributed the rising NEV sales to incentives from China’s local governments and continued production increases by major carmakers in China such as BYD – easily the industry leader – and Tesla.
BYD (Warren Buffett has sold 3 million shares in recent weeks for around $US100 million as the car and battery maker hits its straps) sold 174,915 NEVs in August – a new record and up from 162,214 units sold in July 2022.
Passenger cars accounting for the bulk of BYD’s sales: of the 173,977 passenger cars sold, 82,678 were pure electric cars and 91,299 were PHEVs. BYD sold a small share – 5,092 units – in overseas markets (in July, the figure was 4,026).
Tesla sold 76,965 Chinese made (in Shanghai) electric cars – the second highest figure after June 2022 78,906. 42,463 of those Tesla electric cars were exported (many to Australia), the most since Tesla began production at its Shanghai plant.
August finally confirmed that BYD is now the biggest maker of EVs by production numbers.
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As encouraging as the NEV sales performance was, China’s inflation data for August was worrying – both consumer and producer price inflation fell sharply in August as Covid restrictions continued in some cities and towns, the heatwave in the southwest cut activity and falling demand for some key products saw prices fall.
China’s producer price inflation eased to an 18-month low annual rate of 2.3% in August from 4.2% in July and less than market consensus of 3.1%.
August’s reading was the 20th month in row that the growth in producer prices slowed, according to data from China’s National Bureau of Statistics.
On a monthly basis, producer prices declined 1.2% in August after falling 1.3% in July – a real sign the price falls are linked to falling levels of activity and demand in manufacturing and some areas of the service sector.
The falls also follow the rolling impact of Covid lockdowns and restrictions in activity since April and the impact of power rationing and the heatwave and other shortages.
At the same time Chinese industry has had to deal with high prices for key commodities such as oil, gas and some metals – these may have fallen since late August but remain higher than a year ago and yet the rate of growth in producer prices has slowed sharply compared to 2021.
The slowing growth in China’s PPI last month was the driven by the slowdown in the price growth of coal, oil and natural gas, petroleum, and chemical raw materials.
Prices charged by non-ferrous metal smelting and rolling processing companies slipped in August after rising the previous month, partially easing the cost pressures at mid-stream and downstream enterprises, China’s National Bureau of Statistics senior statistician Dong Lijuan said in a statement on Friday.
That’s a clear sign that Chinese industry is facing weak demand and companies are price cutting to try and shift product.
Consumer prices rose at at annual 2.5% in August, down from 2.9% in July and less than forecasts of 2.8%.
The slowdown in consumer prices came amid efforts from Beijing to ease the impact of the pandemic and heatwave with costs slowing for both food and non-food.
Prices of food rose by an annual 6.1%, slowing from a 6.3% rise in July which was the steepest pace in 22 months. The cost of non-food went up 1.7%, moderating from a 1.9% gain, due to a slowdown in transport & communication, housing, household goods and services and clothing
On a month-on-month basis, consumer prices unexpectedly fell 0.1% in August, the first monthly decline in three months, missing forecasts for a 0.2% rise, after July’s sharp 0.5% jump.
The weak price data and activity surveys (at the start of the month) help explain why China cut various interest rates in August.
Most notably, the People’s Bank of China cut the one-year loan prime rate, a market-based benchmark lending rate, by 5 basis points to 3.65%, while the over-five-year LPR, a reference for long-term loans like mortgages, was also trimmed by 15 basis points to 4.30%.
Friday sees the release of the final monthly economic data on investment, retail sales and production – all are expected to again confirm the economy’s performance remains lacklustre.
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Covid lockdowns remain a big drain on the economy.
Over the past two weeks, eight Chinese megacities – led by Chengdu in Sichuan and 21 million people – have gone into full or partial lockdowns. Together these vital centers of manufacturing and transport are home to 127 million people.
Nationwide, at least 74 cities had been closed off since late August, affecting more than 313 million people.
Goldman Sachs last week estimated that cities impacted by lockdowns account for 35% of China’s gross domestic product (GDP).
Goldman Sachs and Nomura both cut their estimates for Chinese economic growth as well. Nomura’s latest estimate if 2.8%, half the official target of around 5.5%. Goldman Sachs cut its forecast to 3.0% from, 3.3%.
