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The author is an analyst of NH Investment & Securities. He can be reached at soohong.cho@nhqv.com. — Ed.
Chinese auto demand is emerging from the Covid-19 crisis. In addition, the xEV market is expanding in line with an accelerated trend towards electrification. While more time is needed for Hyundai Motor Group (HMG) to show a meaningful earnings recovery in China, given favorable market conditions and low-base effects, HMC/Kia’s Chinese market sales this year should escape their lengthy (since 2018) downtrend.
Chinese auto sales recovering; xEV market is expanding
Chinese market auto sales in February recorded 1.17mn units (+371.9% y-y). By power source, ICE vehicle sales were around 1.08mn units (+348.3% y-y), and xEV (EV/PHEV) sales totaled 96,546 units (+675.0% y-y). The portion of xEVs of the overall automotive market rose to 8.2% (vs 4.9% in Feb 2020 and 7.2% in Jan 2021).
In February, Tesla sales in China recorded 18,318 units (13,688 for Model 3; 4,630 for Model Y; February xEV M/S of 19.0%). Following the Model 3 last year, Tesla expanded its sales lineup by launching the Model Y this year. Sales for three xEV start-ups (Nio, Xiaopeng, and Riauto) showed a combined 10,101 units (+934.9% y-y), with their combined share of China’s xEV market standing at 10.5% (vs 7.8% in Feb 2020 and 12.0% in Jan 2021).
HMG’s China recovery is slow, but to break away from lengthy (since 2018) sales downtrend
Hyundai Motor Company (HMC) and Kia Motors (Kia)’s February sales in China (retail) reached 29,015 units (+296.8% y-y, M/S 2.5%) and 11,101 units (+389.5% y-y, M/S 0.94%) respectively, helped by y-y low-base effects. But, with HMC/Kia’s combined share of the Chinese market being restrained to only 3.4% in February, HMG’s Chinese business continues to perform sluggishly.
More time is needed for HMG to achieve a meaningful Chinese business recovery through brand repositioning efforts. That said, this year, Chinese automotive market sales are expected to bounce back to the level witnessed in 2019 (approximately 20.7mn units). Also given both y-y low-base effects and the gradual appearance of business restructuring effects, we expect HMC/Kia’s 2021 Chinese market sales to escape the downtrend seen since 2018.
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Read More: Automotive Industry: Chinese Market Recovering; xEV Market Expanding
2021-03-10 02:01:09
