(Yicai Global) Sept. 21 -- China's automotive sector will see steady growth throughout the second half despite a year-on-year decline in sales last month, according to the Ministry of Commerce.

Car-buying in China is still in the development stages, ministry spokesman Gao Feng said at a press briefing yesterday. There are more than 200 million cars on the country's roads, but per-capita ownership in third- and fourth-tier cities and central and western regions is still low, he added, saying there is plenty of potential for growth.

China's auto sales dipped 4.6 percent on the year to 1.79 million units in August, according to the China Association of Automobile Manufacturers. The drop marked the second consecutive month with an annual decline, which Gao put down to three main reasons.

The first was a high base set last year. China has been the world's biggest car-selling nation for nine straight years and hit a record high sales figure in 2017 -- nearly 28.9 million units. With preferential tax policies due to wind up at the end of that year, many people opted to buy cars sooner and this led to constant gains over the second half.

Tariff cuts this year have also left some would-be buyers holding back, Gao added. Beijing reduced car import tariffs on July 1 this year, and many consumers are waiting to see how carmakers adjust their prices before purchasing. The range of cars buyers have access to is also broadening as manufacturers reduce prices, so they may be waiting to see what other options become available, he said.

Despite the annual dip, sales did increase on the month in Augus --, up 200,000 units or 12.6 percent from Jul -- which suggests that more consumers are starting to buy as imported car prices fall, Gao continued.

The third factor in the August slump was a change in consumption patterns, he added. CAAM data shows that the proportion of first-time purchases is declining, trimming the market share of low-end passenger cars and making high-end cars and those with mid-sized engines the mainstays of market growth. Sports-utility vehicles sales increased 6.2 percent annually over the first eight months, considerably faster than 3.7 percent among all cars.

Electric Growth

As well as being the world's biggest car market, China is also the biggest seller of new-energy vehicles. It pushed hard to retain that title over the first eight months, shifting 601,000 units -- or 88 percent more than the year-ago period -- through an incentive program. Gao believes the rapid growth will continue throughout the second half.

More and more NEV makers are setting up shop in China as they battle to claim the crown of being the Chinese Tesla. Shanghai-based Nio raised around USD1 billion from its initial public offering in New York this month, and a host of other startups and traditional carmakers are trying to blaze trails in the field, including BYD, WM Motor and Xpeng.

China also exported more cars over the first eight months, sending 760,000 vehicles and chasses overseas. The value of the units totalled more than USD10 billion, a quarter more than the same period a year earlier, and will continue to rise to boost total car sales throughout the second half, Gao said.

Editor: James Boynton