Is the oil price a barometer of China's automobile market? From a wavelet-based quantile-on-quantile regression perspective

Highlights: • The wavelet multiscale decomposition method is employed to decomposes oil price into different frequencies. • The quantile-on-quantile is applied to investigate the linkages at different frequencies of oil price. • Fuel, electric and plug-in hybrid electric vehicle sales present heterogeneous responses to oil price. This paper discusses the heterogeneous responses of fuel, electric and plug-in hybrid electric vehicle sales to different time frequencies of oil prices using wavelet multiscale decomposition and quantile-on-quantile methods. The empirical results show that the link between oil prices and vehicle sales in each subsector of the automobile market varies, and the coefficients change and even present opposite directions at different quantiles and frequencies of the oil price. The major contribution of this paper is that the heterogeneities of oil price time frequencies, subdivided automobile markets and policy implications are fully considered, which can provide more accurate and valuable conclusions. Policy implications are further provided to alleviate external shocks from oil prices. Government plans for clean energies should be considered a cornerstone in establishing automobile industry policies. Subsidies, especially green technologies, are also necessary for fuel vehicle manufacturers to develop highly efficient engines and consequently reduce oil consumption. In addition, China's energy pricing mechanism needs to be reformed to prevent disconnection between domestic oil products and international oil markets.