Growth trend for NEVs, SUVs still strong
The vehicle market in China is cooling, with sales growth expected to slow further, but the world's largest auto market will expand moderately in the medium to long term, according to a report released on Thursday.
Growth trends for new-energy vehicles (NEVs) and sport utility vehicles (SUVs) will remain strong, said a report from UBS Securities Co.
The report studied passenger car markets in South Korea from 1981 to 2000 and Japan from 1961 to 1980, where sales growth went through three phases based on ownership rates, descending from high-speed growth to low-speed growth, according to Zou Tianlong, a transportation and infrastructure analyst with China equities research at UBS.
In the cases of South Korea and Japan, the markets entered the third phase of low-speed growth when ownership rates hit 140 to 150 cars per 1,000 people, Zou said Thursday at a release event.
He said the ownership rate in China was about 100 cars per 1,000 people at the end of 2015, and in one to two years, the Chinese passenger car market will enter the phase of very slow growth.
"Our estimate is, by 2020, the medium- to long-term compound growth rate for passenger car sales in China will be around 5 percent," Zou said.
In the near term, the passenger car market will still enjoy high single-digit growth, which forecast a growth rate of 8 percent for 2016.
Meanwhile, the outlook for SUVs and NEVs will remain strong, according to the report. It forecast a compound growth rate of 16 percent for SUV sales in the next five years, with a compound growth rate of 23 percent for NEV sales.
The strong trend was reflected in the 2016 Beijing International Automobile Exhibition, where 20 SUV models and 15 NEV models out of a total of 50 were shown, Zou noted.
The fast growth in NEVs has been supported by government incentives, such as cuts to sales tax, and Chinese customers' preference for cars with spacious interiors, Zou said.
However, government incentives for NEVs might hurt manufacturers' motivation to innovate and improve technologies, the report said, adding that an underdeveloped charging infrastructure remains an obstacle for further expansion of NEVs in China and around the world.
