After months of lockdown and economic inactivity, China is slowly easing back to normalcy, after a historic GDP contraction by 6.8% year-on-year in the first quarter of 2020, the country’s first significant drop since 1992. The recovery progress in the different industries differ, with some still struggling to pick up pace.
According to the China Association of Automobile Manufacturers (CAAM), vehicle sales were estimated to rise to 2.30 million units in June. Similarly, the China Passenger Car Association said that retail sales of cars, SUVs and multiple-purpose vehicles increased by 1.9% in May 2020, the first gain the industry has seen since June 2019.
The Rhenus Group is a leading logistics service provider with 750 business sites worldwide, and China plays a major role on the Asian front. With 15 offices spread across the mainland, focus areas for Rhenus China include multimodal transport operations, warehousing, as well as innovative value-added services, catering to the needs of various industries including automotive.
China is the largest automobile manufacturer in the world. In 2019, it made 28% of all vehicles produced globally, according to the International Organization of Motor Vehicle Manufacturers. That output, however, serves China's domestic market almost exclusively. The country exported roughly 3% of the vehicles it produced in 2019.
Despite China’s ability to reopen its economy quickly and ramp up manufacturing capacity, there remains a general air of caution and a cloud of ambiguity among China consumers as the country continues to be embroiled in the trade conflict with the United States. Coupled with increasing job losses in the economy, it has fuelled an atmosphere of uncertainty. CAAM also cautioned that even if China contains the coronavirus outbreak effectively, its auto sales are expected to drop 15% this year, from over 25 million vehicles in 2019.
Challenges that existed prior to the pandemic will continue to cast a shadow on the industry. With growing concerns about the impact the industry has on the environment, the automotive industry has been forced to reinvent itself in order to comply with new environmental requirements and commitments imposed by the Chinese government. In cities such as Beijing, Guangzhou and Shanghai, where car density has reached a peak of 250 vehicles per kilometre of roads, more policies addressing the country’s worsening traffic conditions and air pollution are expected to follow. In a McKinsey study, it estimates that another 20 Chinese cities will exceed this car density threshold, which may prompt official to introduce policies that restrict car use in big cities. 
Automotive brands are also on a race to maintain its current share of customers, as China’s domestic market is saturated. Companies are also intensely competing for a share of China’s electric vehicle market, with manufacturers scrambling to innovate a vehicle to impress consumers.
Still, there are encouraging signs amidst these challenges. McKinsey forecasts the growth of China’s automotive market to reach 22 million vehicles in 2020, bigger than European or North American markets.  China is optimistic about overseas market sales where the automotive industry still has potential to grow, including Asia, when the markets recover.
Michael believes that although the electric cars industry may not yet be at a stage to trigger significant changes in automotive logistics, the evolution is coming, and the stakeholders must plan accordingly. Logistics providers will still have to anticipate and adapt to the different requirements of vehicles, such as the careful handling of batteries and charging parts of any potential electric vehicles entering the market.
Across industries, we have all had to face unprecedented obstacles amidst the pandemic and the world as we know it will never be the same. In a post-Covid world, the Rhenus Group recognises the importance of rethinking our ways of working and continues to stay updated with the latest developments, in order to deliver the most reliable and safe service to our customers.
 China Association of Automobile Manufacturers-- Economic Performance of Automobile Industry in June 2020
 Bloomberg -- China Monthly Car Sales Rise for First Time in Almost a Year
 Fortune -- Why this analyst says the future of cars is electric—and Chinese
 Reuters -- China auto sales growth seen for second straight month, boosting recovery hopes
 McKinsey & Company -- Bigger, better, broader: A perspective on China’s auto market in 2020
Edited by: Jolly Baruah and Cherry Peng