BEIJING -- A recovery in China's car sales accelerated last month, signaling that the world's biggest auto market is emerging from a two-year slump as the economy improves and pandemic restrictions ease.
Retail sales of sedans, SUVs, minivans and multipurpose vehicles increased 7.9% in July from a year earlier to 1.63 million units, the China Passenger Car Association said Tuesday. The sales trend had been improving on a monthly basis since March before a 6.5% drop in June. Tesla Inc. and BYD Co. led the way in electric-car sales last month.
The association reported that wholesale sales of passenger cars jumped 8.5% from a year earlier to 1.67 million units. That implies an increase in inventories, suggesting that retail sales to consumers haven't been as strong as sales from manufacturers to dealerships.
Demand already was weak before the pandemic hit, because of consumer jitters over a slowing economy and trade tensions with Washington. Sales fell 9.6% last year, the second-straight annual decline. But customers appear to have returned to showrooms, looking for deals.
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"The trend is good after recovering momentum in the second quarter of the year," the group said in a statement.
Weakness in the China market has hurt global automakers that are looking to China to propel sales growth.
It also squeezed cash flow at a time when global and Chinese brands are spending billions of dollars to develop electric vehicles under pressure to meet government sales quotas.
Demand for electric vehicles weakened last year after Beijing reduced subsidies that helped to make China their biggest market, accounting for half of global sales.
But in July sales of gasoline-electric hybrid and pure-electric vehicles rebounded, jumping 19.3% to 98,000 units. Still, in the first seven months of the year, sales slumped 32.8% to 486,000.
Sales of commercial vehicles surged 59.4% from a year earlier, to 447,000, led by trucks. In the first seven months of the year, sales climbed 14.3% from a year earlier to 2.8 million.
SUV sales in July rose 14% from a year earlier while sales of sedans rose 4.6%.
China's market is still dominated mainly by foreign brands. Sales of Chinese vehicle models rose 4.5% in July from a year ago to 585,000 units. They had an overall market share of 35.1%, down slightly from a year earlier.
Yet challenges remain: the economy is still recuperating, and new technologies such as electrified motors may be prompting some buyers to put off purchase decisions until more models with such features have come out. China's gross domestic product expanded 3.2% in the three months to June from a year earlier, following a 6.8% decline in the first quarter.
Investors have been encouraged by the uptick in sales. Shares of China market leader Volkswagen AG have risen more than 40% from a mid-March low, while challenger General Motors Co. is up more than 60% over that span. Local contender Geely Automobile Holdings Ltd. is up almost 60%, and peer Brilliance China Automotive Holdings Ltd., a partner of BMW AG, has added about 70%.
German and Japanese brands will benefit the most from improving demand as consumers trade up, said Steve Man, an analyst at Bloomberg Intelligence in Hong Kong. GM and Ford Motor Co. may get hit by escalating tensions between China and the U.S., he said.
Tesla, which started deliveries from its new Shanghai factory around the start of 2020, has quickly grabbed market leadership in pure electric vehicles and been a rare example of an electric vehicle maker increasing monthly registrations this year. Tesla sold 11,014 autos last month in China and kept its top spot in battery-powered cars, the Passenger Car Association said.
BYD ranked No. 1 in total neighborhood electric vehicle sales in July with about 14,000 units, the association said. Neighborhood electric vehicles are small, low-speed, four-wheeled units designed for short hops on city streets.
The company, backed by Warren Buffett's Berkshire Hathaway Inc., was helped by sales of both pure electric cars as well as plug-in hybrids, which also use gasoline.
Information for this article was contributed by staff members of The Associated Press and by staff members of Bloomberg News.
