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China overtakes US as world’s no.1 car market

Posted by smeddum on June 12, 2009

The risk in China’s brisk car market

This goes some way to explaining oil price increases

16:46, June 10, 2009
People’s Daily
If someone asks what kind of commodity market is most brisk in China this year, the ready answer would definitely be car market.

Against a backdrop of slump car markets worldwide from January to May this year, car market in China is the first to warm up, and car sales have grown for five months in a row. So, the country has overtaken the United States as the world’s No. 1 car market. If nothing goes wrong in the year, China’s auto sales will breach the 10 million target.

China has so far thrown in billions of yuan through stimulus measures, including car purchase tax cuts, subsidies for rural buyers and a program of old-for-new car subsidies. Such viable, efficient measures have greatly spurred the rejuvenation of its car market, bolstered consumers’ confidence with an ensuing fast, remarkable effect.

China’s car market has entered into a new, high-speed growth period, acknowledge some industry insiders. Based on the optimistic estimate, a batch of Chinese car manufacturers have begun to raise their production quota, and so an undercurrent is however moving ahead for a new round of car production expansion.

Then, has the Chinese car market really stepped out of the shadow of the spreading global financial crisis, or has a new “golden period” for rapid economic growth come up? The conclusion is too early to reach nevertheless.

First of all, in view of demands, the prosperity of the mainstream market now focuses on passenger cars, and particularly those cars with small exhaust capacity, which are eligible to government preferential policies. Despite a rising trend in the sales of mid- and high-quality vehicles, the sales of such vehicles remain much lower that of mid- and low-quality vehicles. More meticulous observations are needed to see whether the future policy for drawing up car sales is possible to sustain.

However, demands for commercial vehicles remain quite week. Relevant statistics indicate that China’s commercial car sales reported a negative growth in the first five months of the year and dropped about 10 percent in May year-on-year.

Second, in view of supplies, some transnational car makers have pinned their hopes on their increased production in China since the global car market is currently still gloomy or indistinct. They not only take the lead in allocating more resources and accelerating the input of commodity cars but also bring entry-level models into the China market. Some car makers of domestic brands, which were somewhat mired in a dilemma for a period of time, have stepped up the expansion of car production and increased its capacity of releasing new cars onto the Chinese market.

Owing to the effect of slow-release in supplies, it is still uncertain if high-speed growth in car production can last or sustain in China. A batch of car-producing enterprises, which are not so competitive, would once again face the life-and-death tests.

China’s passenger car sales slumped 19 percent in the first week of June over the same period in May, according to track-down data released by the National Passenger Car Association. Hence, vigilance should be heightened so as to guard against this trend.

Sustained growth in China’s car sales has dispelled the absurdity that the Chinese car market would decline. This does not mean the country can have “blind optimism”. Only by means of conducting technological innovation and carrying out structural readjustment or retooling steadily and unswervingly, can China’s auto industry have a very firm, solid footing before the arrival of another “violent storm”.

By People’s Daily Online and contributed by PD reporter Wang Zheng

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