Sales of new energy models post record high in June; key to H1 growth

China's machinery sector recorded a year-on-year added value growth of 0.7 percent in the first six months, showing the resilience of the nation's machinery industry, with booming sales of new energy vehicles one of the highlights, a report said.

In the first half, the growth rate of the machinery sector, an important economic indicator, was lower than the growth rates of the industrial and manufacturing sectors, but the machinery sector ended its downward trend in April and May, Beijing-based China Machinery Industry Federation (CMIF) said in a news conference on Tuesday.

During the January-June period, output and sales volume of NEVs both exceeded 2.6 million units, up 120 percent year-on-year, and the category's market share rose to 21.6 percent of the total. In June, the output and sales volumes reached nearly 600,000 units to hit a record high.

"Strategic emerging industries have been playing a positive role in stabilizing growth. Their growth rate has been higher than average in the machinery industry by 4.7 percentage points," said Chen Bin, executive vice-president of CMIF.

For new consumption trends amid the COVID-19 era, Chinese consumers have shown an increasingly strong demand for NEVs, and operators should invest continuously in new technologies related to cars, said Yang Li, a global partner with Boston Consulting Group.

In the first half, affected by complex international situations and the resurgence of local COVID-19 cases, the machinery industry faced certain growth pressures. Particularly, the automobile sector suffered a significant impact, as COVID-19 cases occurred in vehicle manufacturing hubs, such as Changchun, Jilin province and Shanghai, affecting normal operations.

During the period, the automobile sector achieved sales revenues and net profits of 4.11 trillion yuan ($608.9 billion) and 211.56 billion yuan, down 3.69 percent and 23.86 percent year-on-year, respectively.

Meanwhile, facing multiple challenges, the energy equipment manufacturing industry grew despite the trend. For instance, a group of pumped-storage power stations has been put into operation for power generation, which helped boost the low-carbon transformation of the energy supply system in the country.

In terms of exports, the machinery sector achieved an export value of $344.12 billion in the first six months, up 10.41 percent year-on-year. Among this, export value to countries and regions involved in the Belt and Road Initiative reached $157.23 billion, growing 13.6 percent year-on-year, the federation said.

"Given the larger context in the first half, it has been a challenge for operators to maintain a growth trend in exports, and this has played an important role in helping to turn the overall trend of the machinery sector positive," Chen said.

Looking ahead, the economic operation of the machinery sector in China is expected to gradually recover in the second half and achieve steady growth throughout the year. The growth rate of the added value of the industry and the operating income of the sector is likely to reach about 5.5 percent as expected earlier this year, the federation said.

In the latter half, the effectiveness of policies and measures related to stabilizing growth will be further revealed, and business operators are likely to have higher confidence. Still, the operating pressure in the machinery industry continues to exist, the federation said.