China’s Car Market Continues to Boom

Driven by unprecedented urbanization, car ownership in China has risen from 1% to 13% over the past decade.  In major cities such as Beijing, car ownership exceeds 30% per 100 households.  Total sales rose from just over 2 million units in 2001 to 13.8 million units last year, according to the China Association of Automobile Manufacturers (CAAM).  By comparison, US auto sales rebounded 11% to nearly 11.6 million vehicles, reversing a four-year slide.  Overall vehicle sales, including trucks and buses, reached 18.1 million units, an increase of 32.4% year-on-year, spurred by tax incentives for small cars and rebates for farmers who traded their jalopies for more fuel-efficient models.

However, rising fuel prices, the scrapping of tax incentives, and measures to ease massive traffic congestion are putting a damper on car sales this year.  The new vehicle registration quota of 240,000, 1/3 of the 2010 total, introduced early this year in Beijing and Shanghai’s measures to restrict out-of-town vehicles, for example, have helped bring down sales to 965,238 units in January, a moderate rise of 12.6% over the same period in 2009.  Nonetheless, industry analysts and auto executives see car sales continuing to grow at a slower but more rational rate (for China) of 10-15% this year due to rising urban incomes and the largely untapped but potentially lucrative inland rural markets as well as third and fourth tier cities and counties.
  Foreign automakers continue to dominate the market with General Motors setting the pace along with a major milestone.  For the first time in its 102 year history, GM has sold more cars and trucks in China last year than it did in the US with a tally of 2.4 million vehicles.  Its closest rival was Volkswagen, which makes only cars in China, sold 1.9 million units, including 228,000 of its best selling brand Audi.  Korean makers Hyundai and partner Kia raked up 1 million as did Japan’s Nissan. 
In spite of recurring labour disputes and embarrassing recalls, Toyota and Honda reported gains of 19% and 12.2% respectively.  Ford, a late-bloomer on the China market, leaped 40%, ahead of all foreign makers.  Six of the top nine sellers in January were joint ventures between foreign brands and Chinese companies.  Meanwhile, domestic automakers are making major inroads too.  Chery Automobile sold nearly 50,000 cars in January and BYD Automobile, a battery maker turned legendary car manufacturer supported by US billionaire Warren Buffet, did likewise although it missed its sales target for 2010.