Annual warning: Don’t read too much into Chinese numbers this time of the year

Booom!

Booom!

Statistics for February new car sales in China are dribbling out, and they are bad. They are supposed to be bad. In February, all of China was (I am looking at you, Elon Musk) truly on vacation, most dealerships were closed for weeks, while people enjoyed the Chinese New Year festivities, either at home with their families, at the beaches of Thailand, or on Tokyo’s Ginza, buying electric toilet seats. Old China hands are used to discombobulated car sales numbers at this time of the year. Aspiring analysts fall for them every year.

Source: Statista

Source: Statista

 

Monthly growth numbers are calculated year-on-year, by comparing with the same month in the previous year. In China, the all-important Chinese New Year follows the phase of the moon, and it falls into January, or February, or both. Sales always spike before the holidays, also because that’s when the books are closed. During the mostly month-long holidays, very little happens sales-wise.

In January, production of new automobiles in China was up 11.47 percent, sales were up 7.56 percent, according to data published by the China Association of Automobile Manufacturers CAAM. When February numbers are published in a week, or so, they are expected to be down hard. Everybody is talking about a Chinese slowdown, so the January numbers did not make many headlines. The February numbers most likely will trigger renewed pronouncements of the Chinese bubble popping. Don’t get suckered in. Old China hands simply ignore monthly data in January and February, they add both months together, and then compare.

Once you do this, you will realize that the Chinese car market has slowed down a lot from former excesses, but it is far from falling. In 2014, automobile production in China rose 7.3 percent to 23.7 million, sales increased 6.9 percent to 23.5 million. To be put in perspective: The Chinese car market is now larger than that of #2 U.S.A. and #3 Japan, taken together. With only 100 cars per thousand people, compared to America’s 800, the Chinese car market has a long way to grow, and grow it will as long as people have the money to buy. The Chinese car market has grown so fast that it outgrew the available roads and breathable air. Once that has caught up, and once Chinese cities lift their restrictions on registrations, sales may increase at double digits again – for a while.

P.S.: Expect an absolutely shocking sales number for Tesla for February. But now, you know better.