Expected Growth in 2010 to Reach 15%

The booming growth of China’s automotive market in 2009 is overwhelming, while the dark days of auto market in 2008 were engraved in everyone’s memory, according to the 21st Century Business Herald. Time flies to the end of 2009 and what's the growth rate of China’s automotive market next year? Why not make a bold prediction?

When we dig into the survey, there were two different voices：the optimistic enterprises and the pessimistic experts. “I am very confident that China will successfully achieve the goal that the GDP growth rate will be more than 8%, and from my own perspective, China’s GDP growth rate will be 8% to 10%,” Volkswagen China CEO Winfried Vahland said. Winfried Vahland anticipated that China’s auto industry growth rate next year would be lower than this year, and next year’s growth rate would reach 15%.

Dongfeng Nissan Executive Vice President Ren Yong believed that the year of 2010 would be the first year when Chinese people buy their second car. So the growth will continue in 2010. However, the auto consumption will become more diverse and more dispersed. Other phenomena can also reflect the enterprises’ optimistic views about the coming year. The advertising biding activity of CCTV on November 18th showed that the advertisements launched by automakers and related industries increased by 70% than this year.

However, there is another typical argument: the root cause of cars sales growth this year is the policy, rather than the market growth. The central and western regions and the second and third tier cities are very sensitive to the purchasing cost, but some related policies have led to the full release of the purchasing power in those cities. Part of the demand has been overdrawn in 2009; therefore, in 2010 car sales growth will fall.

According to law of economics, cars belong to the commodity whose price and income are the most flexible, especially in China. In the U.S., cars are necessities. People cannot live without cars, while in China, people has a variety of travel options, including walking, cycling, bus and subway, etc. Therefore a greater flexibility exists. Once influenced by relevant factors, the product of great elasticity will undergo great market volatility.

Moreover, in China, cars are not well popularized. The car-ownership among thousands of people is only 40, even lower than that of some poor countries and regions, while the car ownership of Europe and Japan has reached 600. China is in the development phase at present. With Chinese people’s sustained growth in incomes, the phase will last for a few decades, until the markets become saturated. So in 2009, policy is definitely the main contributor to the growth of automotive market, but the policy is not the only spur.

China Automobile Dealers Association Deputy Secretary-General Luo Lei said if the market demand for increment was more than 25% it would result in an excessive growth. The excessive growth of market demand means short supply. A considerable number of products cannot meet the demand, which makes consumers spend three or four months or even longer time to wait.

Seen from this year’s car sales data and market response, this year’s car sales growth is really typical of the excessive growth of market demand. However, the financial crisis in 2008 ruthlessly suppressed the potentials of auto consumption. Its actual sales are only 9.36 million, up just 6.7%, and there is a gap of 1.1 million sales to achieve the objectives. In 2009, as China’s auto consumption policy offers a strong pull for consumption of cars and the macro economic situation turns good, consumption of cars that should take place in 2008 is delayed to 2009.

In 2009 the sales will reach 13 million with an increase of 23%. If we exclude the transfer of consumption potentials, the growth rate of automotive market in 2009 is in a reasonable range.

Our neighbors, Japan, spent about 30 years to turn its car market from the start to saturation. South Korea spent 20 years. It is in 2000 that cars become one part of Chinese people’s life. If it will take ten to fifteen years to accomplish the popularity of cars, then there is 5 year left for the phase of rapid development. So it is anticipated that the car market will maintain double-digit growth next year. (Qinghua/Sailor)

　　See original Chinese report Please click