China's Smaller Cities Help Boost New Car Sales in 2015

Cars and Drivers

Published: April 7, 2016 8:20 am

Last Updated: January 13, 2020 11:04 am

Passenger car sales rose 11% in China last year, the slowest pace in the past three years. A more interesting data point is that more than half (55%) of foreign brand sales were outside the country’s largest cities.

Eight of China’s largest cities have imposed quotas on new registrations in order to fight air pollution and congestion. The eight include China’s three largest cities — Beijing, Shanghai, and Guangzhou — and these restrictions alone severely limit the sales of new cars. Add in registration fees that can double the price of new car and it’s easy to see how sales could suffer.

But if sales are dropping in the nation’s largest cities (so-called Tier 1 and Tier 2 cities), sales are thriving in the country’s smaller Tier 3 and Tier 4 cities, according to research from JATO Dynamics. Workers’ wages are rising in these cities and more Chinese consumers are buying their first car.

Like most of the world, the Chinese are buying sport utility vehicles (SUVs). Sales of SUVs rose 33% in 2014 and another 45% in 2015. The popular vehicles accounted for nearly a third of all new cars sold last year in China.

Foreign brands continue to lead China’s auto market, but growth has slowed. Volkswagen sold 2.6 million vehicles in China last year, but has lost more than two points of market share since 2013. Toyota Motor Corp. (NYSE: TM) sold 1.13 million vehicles in China last year to rank second. Toyota’s market share has risen just a quarter point in two years.

General Motors Co.’s (NYSE: GM) Buick brand gained the most market share among the Detroit Three in China since 2013, up 0.4 points. The company’s Chevrolet brand has lost 1.3 points of share. Buick sold 990,000 cars in China last year, and Chevy sold 625,000.

Ford Motor Co. (NYSE: F) has gained just 0.4 points of share in the past two years, with sales of 848,000 in 2015.

If the foreign brands have lagged in growth, China’s domestic carmakers have picked up the slack. Baojun, Haval and Geely each added more than a point of share in 2015, and Geely has added 2.5 points since 2013, with Haval up 2.4 points in the same period.