Consumers at an auto exhibition in Changzhou, East China's Jiangsu Province, in August. Photo: CNSphoto

The COVID-19 outbreak that struck early this year posed a major challenge to China's auto industry. However, with the effective control of the epidemic, China's auto market has now taken the lead in the global recovery, with a positive month-on-month growth for four consecutive months since bottoming in March.

Auto industry associations expect that the surge will usher in new opportunities for China's car industry, which is expected to have a positive effect globally too.

Despite the epidemic dealing a blow to the industry, driven by market resumption, the production and sales of automobiles in China only experienced a narrow decline.

According to the latest production and sales data released by the China Association of Automobile Manufacturers (CAAM), the production and sales of automobiles in the first seven months of the year reached 12.31 million and 12.36 million respectively, down 11.8 and 12.7 percent year-on-year. 

But the declines were 5 and 4.2 percentage points narrower than in the January-June period.

Meanwhile, automobile production and sales in July reached 2.2 million and 2.1 million units respectively, up 21.9 and 16.4 percent year-on-year, the association's report said.

"The market demand had been constrained during the peak period of the outbreak from January to March, and after the successful containment of the epidemic, the Chinese economy went into recovery which led to a rebound in consumption," Xu Haidong, assistant secretary-general of the CAAM, told the Global Times on Tuesday.

By contrast, the European and US car markets were much less optimistic, with international brands such as BMW and Audi remaining weak in global markets outside China due to the ongoing pandemic.

BMW sold more than 320,000 cars in China in the first half of the year, up 17 percent in the second quarter, but global sales fell 23 percent in the first half, with year-on-year declines of 32.3 percent in Europe and 29.4 percent in the US, according to media reports.

About 2.4 million cars have been cut from production in Europe and 1.1 million jobs have been directly affected by the outbreak, said Dominik Declercq, China representative for the European Automobile Manufacturers' Association, at the 2020 China Auto Forum organized by CAAM in Shanghai from August 13 to August 15.

Declercq added that the European passenger car market saw an unprecedented four consecutive declines in the first half of the year and is expected to contract by about 25 percent in 2020.

The Chinese market has also provided valuable support for Japanese auto sales, with car producers such as Toyota and Nissan maintaining positive growth in the Chinese market for three consecutive months.

Drive into future growth

As the Chinese market becomes a driving force in the global auto industry, leading auto companies are directing their current and future business plans toward China to ensure they stay in tune with the world's biggest auto market.

Mercedes-Benz and the Chinese battery supplier Contemporary Amperex Technology Co announced a deepening of their cooperation in the field of battery-powered technology to support the high-volume electrification of the Mercedes-Benz model portfolio, according to a statement made by the companies on Monday. 

This comes just a month after the Chinese company signed an agreement to form comprehensive strategic alliances to make batteries for NEVs in July.

With good prospects for China's NEV market, Volkswagen paid 2.1 billion euros ($2.5 billion) for shares in JAC and battery maker Hefei Guoxuan High-tech Power Energy Co at the end of May, media reports.

In addition to the huge market potential, the supportive policies of China's central and local governments have also made it easier for international car producers to recover from the epidemic fallout.

In the first half of the year, all sole proprietorship enterprises of Volvo Group China enjoyed government support through social security reductions and rent reductions totaling nearly 20 million yuan ($2.89 million), China News Service reported in August, citing Ma Jun, president of Volvo (China) Investment Co.

The current production and operation of the company are inclined toward the Chinese market, said Ma, noting that although the production lines in Europe have not been fully restored to their pre-epidemic capacity, the products will be provided to the Chinese market as a priority, the report said.

"Most of the world's car sales are now in China, and foreign car brands will continue to invest more in China," Xu said.

He noted that China is the world's largest auto market and has the most comprehensive auto supply chains, which are China's two biggest advantages in the global auto industry.

"China is leading the world in intelligent, networked, electric and shared development of the automotive industry," Christoph Wolff, a member of the executive committee at the World Economic Forum said at the auto forum in Shanghai in August.

China has the world's largest market for new energy vehicles, accounting for more than 50 percent of global sales, Wolff added at the time.

"The growth in auto demand is expected to continue in China in the second half of the year, as the gap between the first half of the year was so large compared with the same period last year," Cui Dongshu, secretary general of the China Passenger Car Association, told the Global Times on Tuesday.

"The second half of this year will be flat or even up 3-5 percentage points from last year," Cui said.

Cui believes that the growth will be particularly outstanding in NEVs, an area that forms the core of the development of the auto industry going forward, and in which China is gaining pace thanks to its fast-growing companies and supportive policies, but still has large shoes to fill when compared with some Western countries.

"At present, of the 24 million passenger cars in China, only around 1 million are NEVs, accounting for around 4 percent," said Cui. 

"While some European countries have already reached 6 percent or higher."

 China may yet catch up, he adds, saying he expects China to reach 10 percent in the next two years and 25 percent by 2025.