Analysis: The current state of the sedan segment in China

Gasgoo.com (Shanghai) - August has been a surprisingly good month for the Chinese automotive market. Much to many people’s surprise, the sedan segment has actually seen a recovery for the first time in several months. Statistics from the China Passenger Car Association show that 919,000 sedans were sold in the country in the month of August, representing year-on-year growth of 19.6%. That growth rate is by far the largest the segment has achieved so far this entire year.

Roland Berger Analyst Zhang Junyi explained: “The entire automotive market performed well in August, which helped positively influence the sedan segment and allow its sales to recover. However, whether or not this trend can continue is hard to say.”

A commentary piece appearing in the National Business Daily points to favorable taxation policies for sales of vehicles with 1.6 L or smaller engines. The policy, which was implemented at the end of last year, has helped stimulate sedan model sales.

Over the past few years, the SUV market has exploded in popularity, with SUV sales becoming the major driver of sales growth. The differences in the performances of the SUV and sedan segments are incredibly stark.

While own brand models like the Geely Emgrand EC7, Cherry Arrizo 5 (pictured above) and Changan Eado managed to achieve respectable monthly sales in excess of 10,000 units, none of them were able to make it into the top ten sales rankings. However, that hasn’t discouraged own brands, with a Geely spokesperson explaining that although the sedan market may continue to shrink, the fact that it was still so large in overall terms means that Geely remains committed to releasing new models.

Although the sedan segment achieved very respectable sales growth of 28.5% in August, it was still far behind overall market sales growth of 28.5%. By comparison, the SUV segment was able to achieve sales growth of over 40%. CPCA statistics show that 919,000 sedans were sold in August, making up over half of the 1.75 million passenger automobile sales made in the country.

The best-selling sedan model of the month was the FAW-VW Jetta, whose sales totaled 366,000 units, up 99.1% year-on-year. Sales of the New Lavida from the same time period totaled 339,000 units, representing year-on-year growth of 20.5%. Meanwhile sales of the Buick Excelle totaled 328,000 units, representing year-on-year growth of 14.8%.

Over the past few years the sedan segment as a whole has been decreasing relatively to the rest of the market. According to China Association of Automobile Manufacturer statistics, in 2013, sedan sales accounted for 66.99% of all vehicles sold in the country. That percentage decreased to 62.82% for the year of 2014 and then to 50.4% for the first half of this year. Among those figures, the amount of sales coming from own brand models is even smaller, with own brands only holding a 17.5% share in the sedan segment this August, down 1.1% from the previous year.

The A-class segment still hold some promise for some in the industry. According to CPCA statistics, 18 of the top 20 best-selling sedan models were A-class sedan models. Their combined sales volume totaled 382,500 units, accounting for 41.6% of all sedans sold in the country. On average A-class sedan sales can total two million to three million units over the course of a year. 

It is precisely the huge sales potential which draws own brand manufacturers like Geely to continue focusing their efforts on this segment. Among the several new own brand models released recently in September was the Geely GL, which Geely hopes will be able to garner market success and compete for a spot among the country’s top ten best selling sedan models.

Geely is one of the only own brand manufacturers to have a top 20 ranking sedan model, the EC7 (pictured), with the other being Chery’s Arrizo 5. Most own brand manufacturers have already shifted their focuses to SUVs and new energy vehicles, with only Geely and GAC Trumpchi having plans to release new sedans. However, Mr. Zhang still believes that there is some merit in persisting in the sedan segment: “Growth in the SUV will reach a limit eventually, while the sedan segment continues to be a steady source of income. By reducing the quality gap with joint venture products and gaining consumer confidence, own brand manufacturers will eventually see gradual success in the segment.”