Autos set to spur consumer spending

 

With the world's largest vehicle fleet, China's automotive sector is undergoing a fundamental transition, which analysts say could open up vast opportunities in the aftermarket, turning incremental demand into exponential consumption scenarios as reinforced by a robust new policy framework.

Their comments came as policymakers rolled out a new batch of measures designed to expand automobile consumption across the entire industry chain, with a particular emphasis on reforming vehicle circulation and bolstering the automotive aftermarket.

Data from the Ministry of Commerce showed that China's vehicle fleet has reached 370 million units, with passenger cars aged seven years or older now accounting for more than half, a threshold that signals a massive aftermarket opportunity.

"Consumers are shifting their focus from simply having a car to asking whether it is good to use and whether it meets diverse needs," said Zhu Keli, founding director of the China Institute of New Economy.

Automobiles are being redefined as personal mobility spaces, with their cultural attributes and service scenarios continuously expanding, Zhu noted, adding that this will create more value-added opportunities across the industrial chain.

According to a circular jointly issued by eight departments including the Ministry of Commerce, 40 cities nationwide have been designated as pilot zones for vehicle circulation reform. Each has been assigned distinct reform priorities tailored to local conditions.

Tianjin, for instance, is focusing on automobile modification, classic cars and racing events; Shenyang in Liaoning province on used car circulation; Yangzhou in Jiangsu province on RV camping; and Hangzhou in Zhejiang province and Shenzhen in Guangdong province on easing purchase restrictions.

The policy push to boost the auto aftermarket came as retail sales in the sector plunged 16.1 percent year-on-year in May, the sharpest decline among all major retail categories and a widening of 0.8 percentage points from April, according to the National Bureau of Statistics.

Data from the bureau also showed that the decline pulled total retail sales of consumer goods into negative territory for the first time since December 2022, with the headline figure falling 0.6 percent year-on-year to 4.1 trillion yuan ($604 billion).

To address the slowdown and tap into new growth sources, China launched this year's new energy vehicle rural promotion campaign, featuring a record 155 models — up more than 25 percent from last year — as policymakers target the vast countryside market where EV penetration remains far below urban levels.

NEV penetration in first- and second-tier cities has surpassed 60 percent and is approaching saturation, said Fu Yifu, a researcher at Jiangsu Su Merchants Bank. By contrast, penetration in rural areas remains below 20 percent.

"First- and second-tier cities have high NEV ownership and are nearing saturation, while county, township and rural markets have lower penetration rates, harboring enormous growth potential," Fu said.

He noted that the campaign can "fully activate the consumption potential of bulk commodities in rural areas, driving the entire upstream and downstream automotive industrial chain — production, circulation and services."

Replacing old, high-emission fuel vehicles and substandard low-speed EVs with NEVs will also support the green transition, while providing modern mobility solutions for farmers' daily commuting, agricultural transport and family travel, he add