Sales of locally made light vehicles reached 1.8 million units in May, up by 9.7% on a year ago, with the same year‐on‐year (YoY) growth as seen last month.

The firm added that light commercial vehicles, however, posted a much weaker performance. Following the positive YoY growth achieved in April, sales of light commercial vehicles fell again by 3.5% on the previous year, to 0.41 million units. Contributing to the decline was the light truck segment, which saw sales fall by 18% compared to a year ago. The pickup and mini truck segments followed suit with YoY declines registering 16% and 5%, respectively.

LMCA said: ‘We believe that these declines can be attributed to the uncertainty surrounding the implementation of China’s IV emission standards for Light Commercial Vehicles. OEMs have held back on wholesales recently in light of the impending new emission standards, the lack of clarity surrounding their implementation, and the hope that history would not repeat itself in terms of previously applied standards.’

Passenger vehicles, in contrast, continued to improve in May. Sales of locally made models totalled 1.40 million units, with YoY growth rising to 14.2% from 12.2% in April. More significantly, the selling rate (SAAR) of all passenger vehicles recorded a new all‐time high of 18.7 million units in May, rallying from an average of 18.0 million units reached in the first four months of this year.

LMCA said the improvement in the passenger vehicle market is viewed as solid, as indicated by CADA’s index; the dealer‐level inventory in May only increased mildly to 1.53 months from 1.52 months at the end of April.

It added: ‘We believe that panic buying, prompted by fears that car purchasing restrictions would spread to China’s other tier‐2 cities, has been the major factor behind the recent increased sales momentum in the Passenger Vehicle market. While some Japanese and Chinese brands posted a decrease in market share at the beginning of this year, followed by a gradual recovery in recent months, we anticipate that wholesales of Passenger Vehicles will pick up modestly as a reaction to the inflated sales in Q4 2013 gradually coming to an end.’

On a positive note, the firm said that macroeconomic conditions have not been an obvious drag on China’s light vehicle market. China’s economy appears to be stabilizing after it registered a weaker‐than‐expected 7.4% YoY growth in Q1. In May, fixed investment growth continued to moderate, but industrial production picked up and retail sales growth exceeded expectations. Merchandise exports also surged in May after three months of weak performance. The slight improvement in domestic economic activity can be attributed to the government’s recent mini stimulus measures. Reversing its tight monetary policy, the central bank has been injecting liquidity into the market and has cut the reserve ratio for small banks in order to support lending activity.

The firm concluded that given these latest developments, its baseline forecast remains unchanged for China’s Light Vehicle sales, namely a YoY growth of 12.4% in Passenger Vehicle sales in 2014, and 10.4% for overall Light Vehicle sales. It also continues to project a seesaw effect as the second highest probable scenario in its forecast.