China Auto Sales in July: Sales up YoY, Inventory Down for 3rd Straight Month

Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

China Automobiles / Thematic (Sector/Industry)

August unit sales in China rose 10.9% sequentially and by 5.6% YoY.  One more selling day in August compared with July saw SAAR dipping slightly to 29.3m units in August from 29.4m units in July.  However, August SAAR was still 7.7% stronger than a year ago.  YTD average SAAR reached 27.6m units in August from 27.4m units in July, consistent with this author's expectations.Some notable highlights from August in this author's view:<ul><li><div class="content-highlight">Production dipped slightly on a seasonally adjusted basis in August, with retail inventory coming down.  Initial observations made by CADA suggest inventory levels have come down sequentially and on YoY basis at the retail level.</div></li><li><div class="content-highlight">Hyundai-Kia's average selling rates for July and August saw a significant jump from the April-June quarter average, albeit not yet close to previous highs prior to China's THAAD related consumer backlash that began in March.  As noted in my July comment, this could be the beginning of Hyundai-Kia's recovery that the stock market does not yet recognize.</div></li></ul><table class="table table-striped"><tbody><tr><td colspan="15"><h2>China YTD Auto Demand</h2></td></tr><tr><td style="text-align: right;">(Mn Units)</td><td style="text-align: right;">Aug 17</td><td style="text-align: right;">Jul 17</td><td style="text-align: right;">MoM</td><td style="text-align: right;">8-16</td><td style="text-align: right;">YoY</td><td style="text-align: right;">YTD17</td><td style="text-align: right;">YTD16</td><td style="text-align: right;">YoY</td><td style="text-align: right;">Aug 17 SAAR</td><td style="text-align: right;">Aug 16 SAAR</td><td style="text-align: right;">YoY</td><td style="text-align: right;">YTD17 SAAR</td><td style="text-align: right;">YTD16 SAAR</td><td style="text-align: right;">YoY</td></tr><tr><td>PV</td><td style="text-align: right;">1.9</td><td style="text-align: right;">1.7</td><td style="text-align: right;">11.7%</td><td style="text-align: right;">1.8</td><td style="text-align: right;">4.4%</td><td style="text-align: right;">14.8</td><td style="text-align: right;">14.4</td><td style="text-align: right;">2.7%</td><td style="text-align: right;">25.1</td><td style="text-align: right;">23.5</td><td style="text-align: right;">6.6%</td><td style="text-align: right;">23.6</td><td style="text-align: right;">22.9</td><td style="text-align: right;">2.9%</td></tr><tr><td>CV</td><td style="text-align: right;">0.3</td><td style="text-align: right;">0.3</td><td style="text-align: right;">6.1%</td><td style="text-align: right;">0.3</td><td style="text-align: right;">12.8%</td><td style="text-align: right;">2.7</td><td style="text-align: right;">2.3</td><td style="text-align: right;">17.0%</td><td style="text-align: right;">4.2</td><td style="text-align: right;">3.7</td><td style="text-align: right;">15.1%</td><td style="text-align: right;">4.1</td><td style="text-align: right;">3.5</td><td style="text-align: right;">17.4%</td></tr><tr><td>Total</td><td style="text-align: right;">2.2</td><td style="text-align: right;">2.0</td><td style="text-align: right;">10.9%</td><td style="text-align: right;">2.1</td><td style="text-align: right;">5.6%</td><td style="text-align: right;">17.5</td><td style="text-align: right;">16.7</td><td style="text-align: right;">4.7%</td><td style="text-align: right;">29.3</td><td style="text-align: right;">27.2</td><td style="text-align: right;">7.7%</td><td style="text-align: right;">27.6</td><td style="text-align: right;">26.4</td><td style="text-align: right;">4.8%</td></tr></tbody></table><div class="content-caption">Sources: CEIC, Author's estimates</div>

August unit sales in China rose 10.9% sequentially and by 5.6% YoY.  One more selling day in August compared with July saw SAAR dipping slightly to 29.3m units in August from 29.4m units in July.  However, August SAAR was still 7.7% stronger than a year ago.  YTD average SAAR reached 27.6m units in August from 27.4m units in July, consistent with this author's expectations.Some notable highlights from August in this author's view:Production dipped slightly on a seasonally adjusted basis in August, with retail inventory coming down.  Initial observations made by CADA suggest inventory levels have come down sequentially and on YoY basis at the retail level.Hyundai-Kia's average selling rates for July and August saw a significant jump from the April-June quarter average, albeit not yet close to previous highs prior to China's THAAD related consumer backlash that began in March.  As noted in my July comment, this could be the beginning of Hyundai-Kia's recovery that the stock market does not yet recognize.China YTD Auto Demand(Mn Units)Aug 17Jul 17MoM8-16YoYYTD17YTD16YoYAug 17 SAARAug 16 SAARYoYYTD17 SAARYTD16 SAARYoYPV1.91.711.7%1.84.4%14.814.42.7%25.123.56.6%23.622.92.9%CV0.30.36.1%0.312.8%2.72.317.0%4.23.715.1%4.13.517.4%Total2.22.010.9%2.15.6%17.516.74.7%29.327.27.7%27.626.44.8%Sources: CEIC, Author's estimates

China Auto Sales in August: Strong SAAR, Low Inventory, and Improving Hyundai-Kia Selling Rates