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CHINA: "Five Reasons to Care About China’s New Five-Year Program"

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back to index backCHINAtalk May,  2016


China Vehicle Demand Finishes Q1 on a Strong Pace

China auto demand increased 12% in March, rising double digits for the fifth time in the past six months (after government incentives were put in place). China auto demand and production grew 9% in Q1, 400bps above our estimate. Growth was led by the Chinese OEMs and luxury brands (each up roughly 15% in the quarter). Commercial vehicle production expanded low/mid single digits in Q1, the first quarter showing growth in two years. We now expect truck production to finish flat for the year.

- Q1 takeaways: In the quarter, auto demand and production (both up 9%) were roughly 400bps above our estimates. Commercial vehicle build also rose 3-4% in Q1 and is expected to finish flat for the year, positive relative to double-digit declines over the past year and a half.

- Auto demand increased 12% in March, rising double digits for the fifth time in the past six months (when government incentives were put in place). Auto sales rose 9% in quarter, solidly above our estimate for 5% growth. We continue to see solid long-term support for China auto demand (rising GDP per capita, especially in tier 2/3 cities) and expect mid-single-digit growth over the next several years.

- Chinese OEMs (+15% in the quarter) continue to lead the market higher. Of the international OEMs, strength was seen at Toyota (+24%) and Honda (+37%). Luxury demand expanded 14% in the quarter, led by gains at Mercedes (+32%) and Audi (+15%).

- Auto production increased 14% in March, continuing a solid Q1 pace (+9%). While our data is roughly consistent with wholesale data from CAAM (+7%), some early reporting suppliers have quoted IHS production figure that showed +4% light vehicle production growth in Q1. We believe primary difference is some light commercial vehicle segments that we exclude from our number given their limited content for auto suppliers.

- Commercial vehicle (medium/heavy truck and bus) demand expanded 7% in March, the fourth consecutive month of growth. Truck demand rose 9% in Q1 with strength seen across the primary segments (medium/heavy-duty truck both +9-10%).

- Truck production grew 10% in the month, the first month of growth in two years. Truck build finished up 3-4% for the quarter, above our initial estimate for mid-single-digit decline. Note, this varies from WABCO’s production assumption down 5% (possibly due to different market definitions). We expect China truck build to be roughly flat in 2016, consistent with estimates from Volvo (flat demand) and WABCO (production flat to down 5%).

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Source: BAIRD - GAI





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