Autos Driving China’s Recovery…But For How Long?

The auto sector has replaced property and infrastructure construction as the primary driver of China’s economic recovery in Q3 2020, boosting both industrial production and retail sales. However, cargo trucks and commercial vehicle sales are primarily responsible for the boost—passenger car demand remains subdued. There is no corresponding spike in fuel sales nor in cargo transport volumes on roads, suggesting the pickup in sales is driven by a program of government subsidies to replace older polluting vehicles. Headline auto sales and output growth will likely stay high for the rest of the year, but will drop in the first half of 2021 after this subsidized replacement demand expires.

Posted October 13, 2020
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