[ET Net News Agency, 13 February 2019] Citi Research has recently hosted a conference
call with Luo Lei, Deputy Secretary-General of CADA, to discuss recent trends in the China
auto dealers sector.
The key message is that 2019 outlook is slightly better than 2018; CADA expects the
government will not over-stimulate the sector but just launch a mild auto stimulus to
marginally prevent a negative retail sales YoY growth pace rolling into 2Q.
Citi said one reason for China auto market decline in 2018 is that many mid-small
enterprises halted production, and many financial companies (P2P) shut down due to the
government's crackdown on the environment, deleveraging, and financial tightening.
Another reason is the purchase tax cut in 2015, which led to 13+% YoY growth in 2016 and
a high base in 2017, which led to 2018 decline due to front-loading demand. Rising
property prices in 2018, especially in 3rd and 4th tier cities also tied household income.
Looking into 2019, Luo sees the potential of policy to speed up scrappage of older
vehicles by providing a one-time subsidy. (KL)