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Understanding China’s Rising Auto Sales in November 2016

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Nov. 20 2020, Updated 1:31 p.m. ET

China’s November auto sales

Automobile sales are a key indicator that investors should watch when assessing the health of the Chinese economy. China’s (FXI) auto sales rose to ~2.9 million in November 2016 from ~2.7 million in October.

Auto sales in November were 17% higher than during the same period in 2015, though the growth pace slowed from 19% in October and 26% in September. Auto sales were higher in 2016 than in 2015 during every month except one.

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First eleven months of 2016

In the first eleven months of 2016, China’s (MCHI) total sales reached 24.9 million units, which is 14% higher than its sales of 21.7 million units in the first eleven months of 2015. The growth rate so far in 2016 has been substantially higher than the growth rate in 2015, when auto sales rose 4.7%—the slowest growth in three years.

Auto sales started rising after the Chinese government cut taxes on small engine automobiles in October 2015.

The importance of China’s auto sales data

Because automobiles use the largest proportion of oil, a significant rise in car sales often leads to higher oil consumption and imports. Higher oil imports and consumption could support tanker demand and rates. Of China’s total oil demand, ~49% comes from road and air transportation.

At the same time, higher auto sales translate to higher oil demand, whereas lower auto sales are often negative for oil consumption, imports, and shipments. Lower oil consumption hurts tanker companies like Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Gener8 Maritime (GNRT), Navios Maritime Midstream Partners (NAP), and Euronav (EURN).

For more key analysis the oil industry, check out Market Realist’s Crude Tanker page.

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