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Chinese auto sales for April came in at record levels...

On Friday the China Association of Automobile Manufacturers announced April sales data showing that last month saw a new record with 1.15 million vehicles sold, 830 thousand of which were cars and vans. 

 Chinese Demand: Turbocharged - cchart

The response to government stimulus package for rural car buyers -providing rebates of 10-13% from March through December, has been pronounced as farm families in central regions seize the opportunity to upgrade (often from antiquated 3 wheeled vehicles) to minivans and light trucks.  Among the bigger winners in the upgrade process is the Chang'an/Suzuki JV which has reportedly seen double digit month over month sales expansion in their popular minivan line.

The stimulus programs to increase demand in rural regions are not limited to automotive purchases. Major household appliances and electronics are also covered, and data from individual manufacturers in Taiwan and Korea suggest that sales of LCD screens have been rising sharply in recent months. Although the very nature of major purchases in a low per capita GDP environment can lead to consumer spending plateaus, the sheer scale of the consumer base being tapped has pushed those concerns into the background for most observers.

All of the data that we have seen from Industry, financials and consumers continue to support the thesis that the stimulus program is working as well or better than hoped for. While we remain as skeptical as the next person about the quality of production data gathered in the mainland and harbor grave concerns about the long term impact on the banking system of loose credit, one thing that we do have confidence in is the Chinese consumer.

The rush of new car buyers in the Chinese interior signals confidence on the part of individual Chinese farmers and villagers that now is a good time to buy and if the Shanghai composite provides an attractive entry point in the near term, we might join them.

Andrew Barber
Director