China’s Car Market Recovered In March

Economic predictions of doom and gloom are coming thick and fast. We have economists all over the world, from Nouriel Roubini to the big wigs at Goldman Sachs calling the coronavirus pandemic “the black swan of black swans” for economic output. A new Great Depression. The end of the world. But a glance over at the Chinese auto market reveals that the green shoots of recovery are emerging. 

The current lockdown has wrecked the auto sector in Europe and the US. People can’t leave their homes to buy cars. In the UK, for instance, manufacturers saw a 44 percent reduction in sales in March – the lowest level in over ten years.  In the US, the figure is around 50 percent. 

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Economists worry that the coronavirus pandemic is leading to an economic catastrophe from which we may not emerge – certainly not quickly. But there are positive reports coming out of China – which recently reopened its business – that things may improve soon once the lockdown comes to an end. 

Chinese dealerships report that they have seen a massive surge in demand since the CCP allowed people to leave their homes for non-essential reasons again. 

It points in the right direction. There are clear signs of business recovery in the country. And that should be a cause for celebration. 

The main fear was that shuttering economic activity for months at a time would put the car industry into cardiac arrest, causing a massive recession similar to the one that we saw in the 1930s. But it doesn’t appear like that will happen – at least not in China. The country’s authorities threw everything that they could at this crisis, including the kitchen sink, and it appears to be working. Shanghai factories are back online. And some experts predict that if things continue to improve at the rate that they were, the market could recover to pre-crisis levels by the middle of the summer. 

As for dealerships in the west, like Angus Mackinnon, the future isn’t so clear. Governments have stimulated their economies, like the Chinese. However, it is still not known whether we’re headed for a dual public health and financial crisis or not. 

If COVID-19 clears up by the middle of the summer – as some experts predict – and we don’t have a second wave, then we could be in the clear. Manufacturers could resume full-time production and then sell to a market buoyed by monetary stimulus. 

If, however, the lockdown drags on and we see people struggling to pay their bills because they can’t earn, then we’re in for a lot of pain. The structure of the car market might fundamentally change like it did in the financial crisis. And we could see production slow and businesses shuttering across the board. 

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Remember, the industry never really recovered from that event. And even before the current crisis hit, the industry was dealing with issues such as electrification and diesel emissions. It was clear that change was on the way. The coronavirus will no doubt accelerate it.