An analysis of Feb Passenger Car Market

　　A Review of February Passenger Car Market

　　Citing an undisclosed source from SOHU Rao Da’s blog, Compared with a year before, despite in February sales also gained a substantially growth, the orders of passenger cars have greatly diminished. Manufacturers have a relatively low expectation over the market in 2010. The production, dealers’ inventories and sales in are all low. The irresponsible assertion of some journalists that the qualities of Chinese automobiles are declining generated by Toyota recall postpones the buying behaviors of many potential users which cool down the auto market. Compared with January, the sales of February have dropped much still because the statistical data of January contains some of the last year’s. However, the output and sales of passenger cars will only decline to a relatively high level due to the rapid economic development, car preferential policies and the changing cognition of Chinese people for owning a car. Therefore, we will not change our forecast for this year. Passenger car market has been expected to cool down, which is necessary because a too late cool down may lead to an early cancellation of incentive policies. The superposition of these two factors would widen the drop and increase the production costs which is unfavorable to the state, the manufacturers and consumers.

　　An Outlook of March Passenger Car Market

　　There are 23 working days in March, one more day than last year and six days more than in February, which is the month has the most working days this year. In March more than tem new models will be launched in the market, which will have some stimulating effect to sales As the weather gets warmer, car buyers will increased at the same time. At the end of the quarter dealers are more willing to earn more sales awards, which may make the prices more preferential. The potential car users who have postponed their buying behaviors will purchase cars concretely in March. These five factors will lead to a growth of nearly 30% compared with February and about 40% compared with a year before in the passenger car market. However, mentioning the average daily sales, this does not mean the auto market will be heating up. According the current maximum capacity, in March the production of passenger cars can be 1.3 million units. Since the market began to slowly cooling down, the output will be less than the maximum production capacity while sales volume will be lower than production.

　　No quality declination of Chinese automobiles

　　Toyota recalls remind some people of the sharply booming of Chinese automobile market that they unreasonably think the quality of Chinese automobiles are suffering declination. More than 90% of the world’s automotive recall is due to design flaws. For century, the car reliability issue has been solved basically, but design negligence in the new structural details would still pose a security risk. For example, a large number of recalls occurred to Toyota since they had been negligent checking the accelerator pedal designed and produced by US CTS Corporation. The recall issues caused by the manufacturing quality are not so common and the number of recalled cars is small. CTS Corporation denied the existence of its manufacturing quality problems, so the quality of vehicles can not be measured only be recalls.

　　Not only did no quality declination of Chinese automobiles existed, but the quality of self-owned brands are increasing substantially, which has expanded the market share. Usually when products sell well, what worries the manufacturers most is exactly the quality. All domestic manufacturers have set up inspection rules and standards when the component parts come into the plant and new cars go out. The previously monthly reported information about car claims now is released weekly. Taking the 39%growth of complaints as a proof, some people asserted the quality is dropping. However what should be ignored is the sales increased by 46% and the complaints accounts for 67.4% in 2008 while 45.8% in 2009. This means the complaints among per million new cars dropped from 4.81 to 3.14, which can lead to the conclusion the quality is greatly improved. The low passenger car market partly caused by blind gossips of the reporters, which is influence the consumer confidence. In fact, consumers need not worry about the quality issue for in all developing countries, the quality of Chinese automobiles is the highest. Suspicion and misunderstanding will not only hurt a company but also do harm to the entire industry. We should always remember that respect others means respect oneself.

　　A clear definition of low-emission vehicle in need

　　Because of its light body, low energy consumption, low emission and small volume, low-emission vehicle is the development direction encouraged by most countries. The passenger vehicle purchase tax preferential policy rules a displacement lower than 1.6-liter since there no clear definition of low-emission cars in China. If car to the countryside policy is not continued, the micro-passenger car market will shrink, which will fail the target to improve the market share of cars with a displacement of lower than 1.6-liter to 40% by the end of 2011 the year, according to automobile industry revitalization planning.

　　However, as technologies advance, small-displacement but high-power engines get more and more and the cars are becoming bigger and bigger. The popular idea of ‘small engine VS large car’ will not only increase vehicle materials consumption but also discount the energy-saving emission. Go to the bottom of the matter, we will find it is caused by the inadequacy of the policies. In Japan, small-displacement cars classified into three segments, namely, lower than 0.66 liters, 0.66-1 liters and 1-1.2 liters. According to China’s physical truth, small-displacement cars should also be categorized into three segments lower than 0.8 liters, 0.8-1liters and 1-1.3 liters. Besides, the limitation in the length, width and altitude should also be set to reduce the policy loopholes.

　　Commercial banks are main force of Chinese automobile consumption credit

　　In developed countries, the main force of automobile consumption credit are auto finance companies because financing are easier and cheaper while the amounts are large enough to meet their basic needs of automobile consumption credit in developed countries for there are more surplus capitals. In China, the capitals are seldom surplus which makes the financing more difficult and costly. Until now, not even one auto finance company has successfully issued bonds. What is more, the registered capitals of the domestic auto finance companies are relatively low which determines that in China the main force of automobile consumption credit are commercial banks no matter in the past, or at present or in the future. If the new policies do not take commercial banks as main force and not change the housing provident fund into housing and cars provident fund, the new policy would be far too divorced from the reality in China, which will be impossible to promote the auto market in recent years.

　　No price wars in the industry

　　There is speculation price wars within the passenger car market will erupt in the second half of this year while we do not think so. The reasons are as follows:

　　1. Except that in 2009 the prices of passenger car are basically stable, More than a decade the prices declination have continuously been so great that there left no room to reduce the prices.

　　2. Except middle-class and high-class passenger cars, in the segment market where they self-owned brands can account for 30% of the market shares, the prices are lower than that of UN market, which is already the lowest worldwide, that is to say, the profit margin is not high.

　　3. As the international economy is getting recovery, the demands and speculations for raw materials and energies will be expanded which may promote the prices. According to estimation, the manufacturing costs will increase 2-3% and the room for prices to cut down will be further reduced.

　　4. The development of economy and inflation expectations will increase the costs of wages, labor, logistics and outsourcing.

　　5. The capacity of passenger cars is insufficient. The investments can not be formed only by the profits of last year.

　　6. The slight adjustment of financial policies has already tightened the funds of enterprises and dealers.

　　7. The rapid development of quality and technologies also increases the costs.

　　8. The management level has been improved so greatly that price wars will no longer a primary means of competition.

　　（Translator: yalong/ Jessie）

　　See original Chinese report Please click:

　　http://raodaauto.blog.sohu.com/145381620.html