China's automobile sales expected to rise 5% to 27.5 million units in CY'22

• Govt to cut subsidies on NEV sales
  
  
• Sharp rise in auto exports to boost production
  
  
• Chip supply shortage to ease in H2CY'22
  
  

Production and sales of automobiles in China will be 26.082 million units and 26.275 million units in 2021 - a year-on-year increase of 3.4% and 3.8%, respectively, according to the China Association of Automobile Manufacturers (CAAM).

In terms of total production and sales, China has ranked first in the world for 13 consecutive years. It is estimated that the country's total automobile sales will reach 27.5 million in 2022, a y-o-y increase of about 5%.

The country's macroeconomic fundamentals will ensure the continued growth of the auto market. With efficient pandemic prevention and control, huge demand potential, the gradual easing of chip supply shortage and strong demand for new energy vehicles (NEVs), China's automobile market is expected to maintain growth in CY'22.

NEV outlook

NEVs are still the bright spot in the auto market, with production and sales of 3.545 million and 3.521 million, respectively, an increase of 1.6 times y-o-y, and a market share of 13.4%, ranking first in the world for seven consecutive years.

However, China will cut subsidies on NEVs, such as electric cars, by 30% in CY'22 and withdraw them altogether by the end of the year, the country's Finance Ministry recently declared on its website.

Chinese authorities believe that NEVs have entered a new stage of development and preferential policies for parking, charging and other use links to be introduced in various places are expected to create a favourable environment for automobile consumption. Improvement in product quality and service are likely to encourage consumer confidence.

Specialty steels

In order to control carbon emissions, lightweight vehicles are the need of the hour and, therefore, the focus is on production of high-strength steels.

As per estimates, the annual composite growth of advanced high strength steels (AHSS) globally will be over 10%, which is more than $145.1 billion. About 47% of the market growth will be from the Asia Pacific region, with China and India as the main contributors.

In CY'22, the growth of the auto parts industry will further push up AHSS market development. China's output of NEVs is expected to reach 8 million units by 2025, and this figure is likely to hit 18 million units globally. With the rapid increase in NEVs, China is likely to emerge as the only country with feasible supply capacity for AHSS.
100% growth in exports

In CY'21, 2.015 million vehicles will be exported, a y-o-y growth of 100%, exceeding 2 million vehicles for the first time. As per CAAM estimates, China's auto exports in the past 10 years hovered around 1 million units, and will exceed 2 million units for the first time in CY'21. In particular, exports of NEVs have shown explosive growth.

Around 310,000 NEVs will be exported in CY'21, a three-fold increase on the year. The European market has become a major incremental market, mainly concentrated in Belgium, the UK, Germany, France, Norway and other developed countries, reflecting the international competitive advantage of China's NEVs. The growth rate of auto exports is expected to be around 20% in CY'22.

Semiconductor supply

he Ministry of Industry and Information Technology (MIIT) has said that the world's major chip companies have gradually increased production and supply and new production capacity will be released. MIIT will take measures to continue to strengthen the connection between upstream and downstream supply and demand and coordinate the promotion and application of automotive chips.

MIIT has and set up work teams for auto chip promotion, established a mechanism of weekly production reports for key vehicle makers and formed an innovation alliance on the China auto chip industry. It is learnt that chip producers are fully booked for H1CY'22 and 90% capacity is booked for H2.

With anticipation of chip shortage to extend to CY'23, many vehicle makers are opting to sign two-three year supply contracts. Sources informed SteelMint that the supply deficit in H1CY'22 will be around 20-30% but will gradually improve in H2.