A Few Thoughts on China's March Auto Demand: SAAR Was Not as Bad as What News Headlines Suggested

Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

China Automobiles / Thematic (Sector/Industry)

<p>February 2019 had 2 more selling days than February 2018, and 5 less selling days than in January 2019.  While CAAM and other media reports were quick to point to the lunar holidays as the main culprit behind the sequential and YoY fall in auto demand, the lunar holiday effect is taken into consideration when the sales figures are seasonally adjusted.  According to our observations China's February SAAR fell sequentially to 21.7m units from 24.8m units January (-12.3% MoM), and from 27.7m units in February 2018 (-21.4% YoY). </p><p>Over the past few months we did not see much macro signals that would point to an imminent collapse in selling rates to the level of February's observation so we would wait for the March data points to assess how much truth there may to suggestions that car buyers may be holding back in anticipation of another round of government stimuli.  In the meantime, we would not ascribe too much credence to talks about lunar holidays or shrinking shadow banking systems as there is very little statistical evidence that would support such anecdotal assertions.</p><p></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/963/original/Screen%20Shot%202019-03-13%20at%206.01.24%20PM.png?1552525296" class="editor-image img-responsive" data-smartkarma-image-id="81963"></figure><div class="content-caption">Sources: CEIC, SAAR estimated by Author using known seasonal factors</div>

February 2019 had 2 more selling days than February 2018, and 5 less selling days than in January 2019.  While CAAM and other media reports were quick to point to the lunar holidays as the main culprit behind the sequential and YoY fall in auto demand, the lunar holiday effect is taken into consideration when the sales figures are seasonally adjusted.  According to our observations China's February SAAR fell sequentially to 21.7m units from 24.8m units January (-12.3% MoM), and from 27.7m units in February 2018 (-21.4% YoY). Over the past few months we did not see much macro signals that would point to an imminent collapse in selling rates to the level of February's observation so we would wait for the March data points to assess how much truth there may to suggestions that car buyers may be holding back in anticipation of another round of government stimuli.  In the meantime, we would not ascribe too much credence to talks about lunar holidays or shrinking shadow banking systems as there is very little statistical evidence that would support such anecdotal assertions.Sources: CEIC, SAAR estimated by Author using known seasonal factors

A Few Thoughts on Weak February China Auto Sales - Lunar Holidays Don't Explain It in SAAR Terms