Cui Dongshu: The replacement policy for passenger cars has ignited the October car market, further benefiting new energy vehicles.

The secretary general of the CPSU, Cui Dongshu, stated in a document that with the replacement policy for passenger vehicles beginning to relay the scrappage subsidy policy, it ignited the car market in October. The scrappage policy is more favorable for new energy vehicles, but the scale is limited. The stimulating effect of the local passenger vehicle replacement policies in recent days is expected to be greater than scrappage, and the stimulating effect of fuel vehicles is significant. It is expected that in the future, there will be strong follow-up policies for scrappage renewal and replacement renewal by 2025, reducing personal income tax for car buyers, promoting new energy vehicles in rural areas, exempting car purchase taxes for compliant pure electric vehicles with a range of less than 200 kilometers, encouraging marriage car purchases, encouraging childbirth car purchases, and more improvement measures to drive car consumption and promote economic growth. In 2024, automotive production demand will grow steadily, social consumption expectations will continue to improve, and high-quality development will be solidly promoted, with the automotive industry continuing its upward trend. Currently, the price of commercial housing in 2024 is 9,862 yuan per square meter, slightly lower than the peak of 10,437 yuan per square meter, but still much higher than the 6,323 yuan per square meter in 2014, and far higher than the peak car sales in 2017 of 7,892 yuan. Real estate loans have been significantly reduced, and real estate investment relies mainly on residents' deposits and advance payments, which have a certain diversion impact on car purchase funds. In 2023, the ratio of automotive sales to real estate sales was 37 square meters of housing to 1 car, and in 2024 it continued to decrease to 32 square meters of housing to 1 car, showing a slight improvement in the ratio between housing and cars, compared to the highest level of 70 square meters to 1 car in 2020. Due to debt pressure, demand for cars is relatively low, and as the only consumer goods that have not been widely popularized in Chinese urban and rural households, the overall trend of the national passenger vehicle market has gradually warmed up in recent years, and passenger vehicle consumption has gradually improved. 1. Strong recovery in automotive consumption In October, the total retail sales of social consumer goods were 4.536 trillion yuan, a year-on-year increase of 4.8%, with a growth rate 1.6 percentage points faster than the previous month. Among them, automotive consumption was 445.2 billion yuan, a year-on-year increase of 4%, while the retail sales of consumer goods excluding automobiles were 40.944 trillion yuan, an increase of 4.9%. From January to October, the total retail sales of social consumer goods were 39.896 trillion yuan, a year-on-year increase of 3.5%. Among them, automotive consumption was 3.9921 trillion yuan, a year-on-year decrease of 2%, while the retail sales of consumer goods excluding automobiles were 35.9039 trillion yuan, an increase of 3.9%. 2. Gradual strengthening of automotive production In October, out of 619 industrial products of a certain scale, the production of 343 products increased year-on-year. Among them, steel production was 119.41 million tons, a year-on-year increase of 3.5%; automobile production was 2.954 million vehicles, an increase of 4.8%, with new energy vehicles totaling 1.428 million vehicles, an increase of 48.6%; electricity generation was 731 billion kilowatt-hours, an increase of 2.1%; and crude oil processing was 59.54 million tons, a decrease of 4.6%. 3. Good performance of automotive value added in 2024 In October, the value added of large-scale industries grew by 5.3% year-on-year (value added growth rates are all actual growth rates excluding price factors). From a month-on-month perspective, the value added of large-scale industries grew by 0.41% in October. From January to October, the value added of large-scale industries grew by 5.8% year-on-year. In 2020, the value added of the automotive industry increased by 6.6%, in 2021 it hovered at a level of 5.5%, in 2022 the value added of the automotive industry was 6.3%, showing a relatively strong performance. In 2023, the value added of the automotive industry increased by 13%, achieving super growth. The value added of the automotive industry in the first ten months of 2024 increased by 7.7%, showing a relatively good improvement, with a 6.2% month-on-month increase in October, demonstrating good performance. 4. Stable utilization of automotive production capacity From 2020 to 2023, the national industrial capacity utilization rate remained within a small fluctuation range of 72.4% to 74.6%. In the first quarter of 2024, the national industrial capacity utilization rate for large-scale industries was 73.6%, and in the second quarter, it was 74.9%, an increase of 0.4 percentage points compared to the same period last year and an increase of 1.3 percentage points compared to the first quarter. In the second quarter of 2024, the capacity utilization rate of the automotive industry was 73%, a decrease of 0.3 percentage points compared to the same period last year and an increase of 8 percentage points compared to the previous quarter. In the third quarter of 2024, the capacity utilization rate of the automotive industry was 73.2%, a decrease of 2.4 percentage points compared to the same period, indicating a low utilization rate of automotive production. 5. Specific situation of automotive production In October 2024, the daily average production of sedans was 32,000 units, a year-on-year decrease of 1.9%. Due to the relatively low base of new energy sedans last year, sedan production fluctuated significantly this year. The low production in October this year is the result of the fluctuation in demand for fuel cars and production. In terms of products, in October 2024, the daily average production of automobiles was 95,000 units, an increase of 4.8%, considering the high base of October 2023, the performance of this year's growth rate was average. In 2022, automobile production was 27.48 million units, an increase of 3% year-on-year, with 7.22 million new energy vehicles produced, an increase of 98%, and a penetration rate of 26%. In 2023, automobile production reached 30.11 million units, an increase of 9% year-on-year, with 9.44 million new energy vehicles produced, an increase of 30%, and a penetration rate of 31%, which was a high growth rate. In October 2024, automobile production reached 2.95 million units, an increase of 5% year-on-year, with 1.43 million new energy vehicles produced, an increase of 49%, and a penetration rate of 48%. From January to October, automobile production reached 24.66 million units, an increase of 3% year-on-year, with 9.90 million new energy vehicles produced, an increase of 36%, and a penetration rate of 40%, achieving accelerated growth. 6. Recovery of automobile investment in 2024 In 2023, automobile investment grew by 19%, with a significant rebound in automobile investment in the past two years, reaching a historical high in nearly six years. The growth rate of automobile investment from January to October in 2024 also reached 5.9%. The growth of new energy vehicles has gradually improved the dilemma of low investment in the automotive industry. 7. Strong continued squeeze effect of car consumption due to the surge in housing prices The booming real estate market from 2016 to 2019 had a significant impact, and its gradual cooling in the later stages had a good promotion effect on the car market. Currently, the real estate market is sluggish under high base figures, with good sales in eastern regions, which is also a phenomenon of the final looting of the real estate market. From January to October 2024, new home sales decreased by 21%, providing a good foundation for stimulating consumption in the car market. Currently, residents' incomes do not support continued high debt levels, so the real estate market has a significant impact on car consumption.The drop in temperature is beneficial to the development of the automobile market.Currently, the relationship between car sales and real estate sales in 2023 is 37 square meters of housing to 1 car, with a prominent unreasonable contrast in sales. By October 2024, this ratio has decreased to 32 square meters of housing to 1 car, reaching a relatively balanced level. Although the improvement from the peak of 70 square meters to 1 car in 2020 is noticeable, the high average price per square meter in the real estate market still puts pressure on consumer spending, causing a low demand for cars due to debt pressure. Currently, the average price of commercial housing in 2024 is 9862 yuan per square meter, slightly lower than the peak of 10437 yuan per square meter but significantly higher than the 6323 yuan per square meter in 2014, and also higher than the peak car sales price of 7892 yuan in 2017. The significant contraction of real estate loans and reliance on residents' down payments and prepayments for real estate investment have diverted funds that could have been used for car purchases. The wealth effect of the real estate market has a certain promoting effect on the demand for high-end cars, and the recent decrease in real estate debt pressure and weakening demand for housing may bring some potential benefits to improving car consumption. Car consumption in 2024 requires sustained policy support The slight improvement in the issue of weak consumption is observed, with negative growth in car consumption from January to October 2024, lagging behind the average growth rate of retail goods, and facing significant pressure for growth on a high base in the future. In October, the total retail sales of consumer goods reached 4.536 trillion yuan, a year-on-year increase of 4.8%, an increase of 1.6 percentage points from the previous month. Among them, car consumption was 445.2 billion yuan, a year-on-year increase of 4%, while the retail sales of goods excluding cars was 40.944 trillion yuan, an increase of 4.9%. From January to October, the total retail sales of consumer goods amounted to 39.896 trillion yuan, a year-on-year increase of 3.5%. Car consumption during this period was 3.9921 trillion yuan, a year-on-year decrease of 2%, while the retail sales of goods excluding cars was 35.9039 trillion yuan, an increase of 3.9%. In recent years, the consumption of refined oil has seen relative negative growth, contributing to the overall pressure on car consumption. In general retail sales, sales of goods above the limit have shown weak performance, indicating the significant impact of real estate on consumer spending and the noticeable inhibitory effect of the real estate market on overall consumer spending.