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Beijing Auto Present: Demand restoration, EV increase combine with bleak prospects

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© Reuters. People wearing face masks after the coronavirus disease (COVID-19) outbreak enter the Beijing International Automotive Exhibition (Auto China Show) venue in Beijing

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By Yilei Sun and Brenda Goh

BEIJING (Reuters) – China's auto market has recovered significantly from the COVID-19 crash in recent months, especially in high-end cars, but questions about the durability of that recovery hung over the Beijing auto show that started on Saturday.

The show is a rare industry event held in person during the pandemic. It marks a triumph for the world's largest auto market, which has been faltering since late last year when lockdowns put economic activity in the country where the disease broke out.

This show will be far from the usual exuberance, however, with fewer visitors, new models barely available, and the outlook remaining uncertain.

The bright spots include the strong rebound in the Chinese market since April, strong demand for midsize to large luxury vehicles, and a flurry of interest – and investment – in electric vehicles.

China's auto sales rose 11.6% year over year in August. This was the fifth straight spike after falling during lockdown. When nearly all residents were told to stay home in February, sales plummeted a record 79% to their lowest level since 2005.

Guangzhou-based GAC (SS :), which has partnerships with Toyota Motor (T 🙂 and Honda Motor (T :), expects full-year sales growth, General Manager Feng Xingya said on the sidelines of the Beijing International Motor Show 2020.

Germany's BMW (DE 🙂 expects “single-digit growth” in China this year, said Jochen Goller, Head of BMW China.

"We were of course badly affected in the first quarter and massively in China," Goller told a small group of reporters with a 30% year-on-year sales decline. The second quarter rebounded 17% and this quarter is going very well. "

"You can say that confidence is back," said Goller.

China's typically busy car buying season "Golden September, Silver October" has got off to a good start according to preliminary data. In the first 20 days of September, car sales rose by 12%.

The rebound means sales will fall less than 10% this year, according to estimates by the Chinese Association of Automobile Manufacturers, better than May's forecast of a 15% to 25% decline.

Much of the upswing is due to the sale of larger passenger cars by manufacturers such as Daimler (DE 🙂 and BMW, fueled by new models, discounts from automakers and a broader recovery in the world's second largest economy.

Premium vehicles accounted for a record 15% of the Chinese market in August, up from around 10% for all of last year, according to the China Passenger Car Association.

Electric vehicles are also causing a stir in Beijing as a boom in Tesla (O 🙂 shares has sparked interest in China. EV startups like Nio (N :), Xpeng (N :), Li Auto (O :), and WM Motor together raised more than $ 8 billion this year.

However, the recent improvement reflects the Chinese automakers who launched earlier models as they couldn't wait for the usual delayed car show hype before they hit the market. This indicates a limited upward movement in the current sales increase.

"This year's auto sales are very different from previous years," said Alan Kang, senior analyst at LMC Automotive. "Many cars were sold in the summer because customers delayed their purchases after the lockdown."

Sales of larger sedans and sport utility vehicles have returned to last year's levels, but competition between mass brands is intensifying, said Yale Zhang, head of Shanghai-based consulting firm AutoForesight.

This is an important battlefield for international and national brands such as Volkswagen (DE :), Toyota (T 🙂 and Geely (HK :)). Still, he said, "The sales performance over these two months will give us an indication of what will happen next."

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