On Tuesday, Bernstein revealed that Chinese automakers experienced a significant sales increase in November 2024, with retail volumes rising by 23.1% year-over-year (YoY) to 2.45 million units. This growth was driven by a 28.7% surge in mass market brand sales, attributed to government trade-in subsidies and promotions by manufacturers. In contrast, premium brand sales dipped by 2.8% YoY, although locally-built premium vehicles saw a 2.0% increase.
Despite the overall positive momentum, which continued into early December with sales running at approximately 30% higher YoY, there is an expectation of a downturn in 2025. Analysts forecast a 5% decline in China's auto demand for the upcoming year, as current sales are likely being accelerated due to the anticipated expiration of supportive policies by year-end. The Seasonally Adjusted Annual Rate (SAAR) for retail sales in November was 27.1 million units, slightly down from October's 27.5 million but exceeding estimates of around 22-23 million units for the year.
The premium segment, however, has faced challenges, particularly for brands lagging in the transition to electrification. In November, retail registrations for BMW (ETR:BMWG) and Audi fell by 18.6% and 8.8% respectively, while Mercedes-Benz (OTC:MBGAF) saw a 4.5% increase. Year-to-date figures showed declines across all three luxury automakers, with BMW down 15.1%, Mercedes-Benz 8.5%, and Audi 7.6%.
Electric vehicles (EVs), encompassing both Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEVs), reached a penetration rate of 50.9% in November, with sales up 61.5% YoY, totaling 1.25 million units. BEV sales alone rose by 44.6%, while PHEVs experienced a remarkable 97.0% growth.
Market leader BYD (SZ:002594), which InvestingPro analysis shows has achieved an impressive 36% revenue CAGR over the past five years and maintains a robust market capitalization of $112.7 billion, led the EV market, followed by Geely, Wuling, Tesla (NASDAQ:TSLA), and Li Auto (NASDAQ:LI), among other Chinese brands.
According to InvestingPro's Financial Health assessment, BYD scores a "GREAT" rating with particularly strong growth metrics.
Inventory levels remained stable, but pricing pressures persist. A comparison of domestic retail and wholesale volumes indicated a net inventory increase of 188,000 units in November.
Over the past 12 months, the industry has seen net inventory destocking of 405,000 units. Despite these inventory adjustments, competition in the EV sector is expected to remain intense due to slower demand growth, excess supply, and declining battery costs.
Retail auto pricing in November fell by approximately 630 basis points YoY. For detailed industry analysis and exclusive insights into automotive sector valuations, InvestingPro subscribers can access comprehensive financial metrics, including P/E ratios, growth forecasts, and expert recommendations. InvestingPro's analysis indicates BYD currently trades at a P/E ratio of 24.27, reflecting market expectations for continued growth.
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