China's auto market rebounds in April

Retail growth in China's auto market rose to -5.6 percent in April, the second high in the past 20 months — a decent performance showing the market is in recovery, according to the China Passenger Car Association on Monday.

CPCA said given that retail growth stood at -20 percent in January prior to the COVID-19 outbreak, and -80 percent in February, the growth rate in April has basically ensured a rebound trend of China's auto market.

CPCA contextualized the V-shape curve of retail growth in April against a background of product destocking in every link of the auto industry chain and the unleashing of pent-up demand in previous months.

As of early March, major automakers outside Hubei have mostly resumed operations, those in Hubei have also begun a return to normal since late March. This led to destocking and releasing orders, one of the reasons for the rebound.

The second reason for the rebound in retail growth is people's concern over a long-tail effect caused by the global pandemic situation. More potential consumers have chosen to buy a car for safer travel. Some preexisting car owners chose to replace their vehicle with a better one out of the same concern.

As for the third reason, CPCA thought consumption stimulus policies advanced by national or local governments drove hesitating buyers to pay for a car.

CPCA said the V-shape rebound is not yet solid. Recovery in tertiary industries is still taking place in a cautious manner. It takes time to see income recovery of consumers. As credit and loans surge, anticipation in home price hikes should be also kept in mind to prevent a vicious circle of save money – buy a house – tighten consumption.