Chinese Car Imports: The Long And Winding Road…

Apr 28, 2018

Following robust growth in Chinese car imports since the early 2000s, China is now the third largest car importer globally behind the US and EU, and accounted for around 6% of global seaborne car imports last year. However, it has not been always been a straight road along the way, with imports last year around 13% below the 2014 level, and ongoing changes to the supplier mix and the policy environment.

Variable Speed Limit

\In 2017, Chinese seaborne car imports totalled 1.2 million units. China’s car market is dominated by domestically produced vehicles, with imports last year equivalent to only 4% of total car sales (which reached 29.0m units in 2017). Nevertheless, China is now a significant importer globally, behind only the US (4.7m cars in 2017) and the EU (3.3m).

However, it has not been a smooth ride. After China joined the WTO, imports grew strongly, and increased by an average of 32% p.a. in 2002-08, before growth stalled in 2009. Beijing’s economic stimulus package helped imports to double in 2010, and imports then continued to grow firmly up until 2014. Chinese car imports subsequently fell back in 2015 and 2016, owing to moderating economic growth and firm competition with domestically produced vehicles. Yet, in 2017, imports bounced back by 16% y-o-y. The rise was supported by stockpiling against a backdrop of improving demand, as well as growing popularity of the government’s ‘parallel imports’ scheme, through which local auto dealers can buy foreign vehicles to sell at more competitive prices.

Broader Network

Meanwhile, the supplier mix of China’s car imports has also evolved over time. In the 2000s, Japan was the largest exporter of cars to China. However the share of Chinese imports accounted for by Japan has dropped to 20-30% in recent years as imports from Europe and the US have risen. Chinese car imports from the US grew by an average of 38% p.a. in 2002-17, with the US overtaking Germany to become China’s second largest supplier in 2014, supported by rising demand for SUVs. The US last year accounted for 23% of China’s total car imports.

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Looking forward, although subject to some uncertainty, the outlook for Chinese car imports currently appears positive. Imports grew firmly by 8% y-o-y in Jan-Feb 2018, supported by growing demand for foreign brands. China has also recently announced plans to further liberalise the car market, which is likely to have an impact going forwards. In particular, proposals to reduce the current 25% tariff on car imports could provide significant support. However, there are also risks in the short-term from China’s threats to introduce an extra 25% tariff on imports of some vehicles from the US (totalling 0.25m cars in 2017) as part of the current trade dispute between the two countries.

So, China is now a major car importer, although imports have not always experienced a smooth ride. While uncertainty over the short-term remains given the potential for disruption to imports from the US, further liberalisation of China’s car market and added demand for foreign cars could help to support further growth in China’s car imports in the future.

Source: Clarkson Research Services Limited

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