BEIJING (Reuters) – China’s auto market has rebounded smartly from the COVID-19 crash in recent months, executives said on Saturday, as a rare in-person trade show was dominated by talk of recovery in the world’s biggest car market.

People wearing face masks following the coronavirus disease (COVID-19) outbreak enter the venue of the Beijing International Automotive Exhibition, or Auto China show, in Beijing, China September 26, 2020. REUTERS/Yilei Sun

While conditions have improved vastly from lockdowns that froze economic activity in the country where the pandemic erupted, the Beijing autoshow is a far cry from the usual ebullience as fewer attend, new models are scant and prospects remain uncertain.

Doubts remain over the durability of the recovery, but the focus for now is on bright spots such as strong demand for mid-sized to large luxury vehicles and a flood of interest – and investment – in electric vehicles.

“The recovery in the Chinese market has been very remarkable, and our key segments have returned to the previous year’s level if not slightly better,” Nissan Motor Co 7201.T CEO Makoto Uchida told a news conference via a video link from Japan.

“I expect this rebound to continue, but we need to watch for signs of trouble,” said Uchida, who announced Japan’s second-biggest carmaker would launch a number of new vehicles in China over the next five years as it struggles to return to profit.

China’s auto sales rose 11.6% in August from a year earlier, the fifth straight monthly rise after plunging during the lockdown.

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When almost all residents were told to stay home in February, sales collapsed by a record 79% to their lowest since 2005.

Executives at Germany’s BMW BMWG.DE and Guangzhou-based GAC 601238.SS, which has partnerships with Toyota Motor Corp 7203.T and Honda Motor Co 7267.T, forecast full-year sales growth in China, while Chongqing Changan Automobile 000625.SZ predicted the same for its local joint venture with Ford Motor Co F.N.

Great Wall Motor Co 601633.SS, China’s top pickup truck maker, aims to boost overseas sales this year, helping to ease an overall drop caused by COVID-19.

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LIMITED UPSIDE

China’s typically busy car-buying season, “Golden September, Silver October”, is off to a good start, according to preliminary data, with passenger car sales up 12% in the first 20 days of September.

The rebound means this year’s sales will fall less than 10%, the China Association of Automobile Manufacturers estimates, better than its May forecast of a 15% to 25% decline.

Much of the upturn is driven by sales of larger passenger cars by makers such as Daimler AG DAIGn.DE and BMW, boosted by new models, automakers’ discounts and a broader recovery in the world’s second-largest economy.

Premium vehicles accounted for a record 15% of the Chinese market in August, up from around 10% for all of last year, the China Passenger Car Association said.

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Electric vehicles are also providing buzz to the Beijing show, as a boom in Tesla TSLA.O shares has propelled interest in China.

EV startups such as Nio NIO.N, Xpeng XPEV.N, Li Auto LI.O and WM Motor have together raised more than $8 billion this year.

But the recent improvement reflects Chinese carmakers making earlier model launches as they could not wait for the usual hype from the delayed autoshow before going to market. That suggests a more limited upside to the current sales rise.

“This year’s auto sales are very different from previous years,” said LMC Automotive senior analyst Alan Kang. “Many cars were sold during summer because customers delayed purchases after the lockdown.”

Sales of larger sedans and sport-utility vehicles have returned to last year’s levels, but competition among mass-market brands is intensifying, said Yale Zhang, head of Shanghai-based consultancy AutoForesight.

That’s a key battle ground for international and domestic brands including Volkswagen VOWG_p.DE, Toyota 7203.T, and Geely 0175.HK.

“Sales performance in these two months will give us a clue of what will happen next,” said Zhang.

Reporting by Yilei Sun and Norihiko Shirouzu; Additional reporting by Brenda Goh and Emily Chow; editing by William Mallard and Jason Neely

Via Reuters Finance