Chinese car market face turning point

　　Since Wang Shi put forward theory of turning point in real estate market in 2008, turning point has been using by many media and reporters frequently. Reasons for the above phenomenon are that turning point is of great importance and can attract considerable attention from various sides. In February of this year sales number of China's passenger vehicles declined about 27% compared with last month, which was supposed to be a turning point by some media. In addition, some models of domestic terminal market also did obvious promotional activities in March, an increasing number of media and consumers believe turning point of Chinese car market is just around the corner.

　　Analyzed from the above chart, there is no denying the fact that compared with record 1.66 million units sales number of January,1.21 million units sales number of February is a illustration of turning point and decline. However, before draw such a conclusion we must realize that 1.22 million units still ranks the fifth monthly sales number in recent five years of Chinese car market. Compared with the 800,000 units of February in 2009, sales performance of February this year is still on a high level and increased nearly 50% compared with the same period of last year.

　　Though relevant department hasn't released sales number of March, it was said that total sales number of Chinese car market in March this year would not be less than 1.4 million units, which will be also consistent with traditional trend. If we put sales number of March this year on the above chart, we can find an up turning point again. The author can't make sure whether media will report theory of up turning point after sales number of March is released.

　　Rao Da, chairman of China Passenger Vehicle Association, said during the interview by Sohu Auto that theory of turning point is absurd. At the same time, Mr. Rao also expressed his opinion through observer of China’s auto industry. In the author's opinion, unlike 2008, demands and sales of Chinese car market this year will not decline obviously from March, though it is difficult to see record sales performance like January in the rest of 2010. From April to August, the author predicted sales number of such traditional sales downturn period is hard to surpass level of March this year.

　　Unbalance of sales number of the following months maybe becomes the overall trend from April this year. Demands for a number of models probably continue to be more than supply, while demands for most of the models are less than the supply. As a result, price of the terminal market will loose gradually and even enhance promotional activities. Besides, tight supply and low inventory in the first half the 2009 will not happen in 2010.Chinese consumers who often read newspapers and surf the internet readily find that compared with the same period of last year, there are more price promotion of car dealers and promotional advertisement of zero rate when purchasing cars, which can somewhat reflect dealers’ attitude towards terminal market has changed.

　　Despite monthly sales number from April to August are less than March, we can't think this is a down turning point of China's auto industry. While observing the trend of a month-on-month basis, it is essential for us to take recent two years' year-on-year growth and month-on-month growth situation into consideration. Sales performance of Chinese car market was on a high level from April to August in 2009, however, gloom sales performance is based on such a high sales number foundation. Consequently, as long as sales number from April to August this year will not decline more than 10% calculated by month-on-month growth, we can't just use month-on-month growth data to judge turning point involves demands and consumption trend of China's auto industry.

　　With the arrival of new added production capacity from 2010 to 2012 of China's mainstream auto manufacturers, competition of China's auto industry will gradually tend to be normal. For most China's auto manufacturers, competition pressure in 2009 is slight and the market policy environment is the best. And for most dealers, difficulties of 2009 not lie on market demand but on themselves and their suppliers' production capability that hasn't been solved until early this year.

　　However, for most auto manufacturers and auto parts & components enterprises, existing high output is accomplished by overtime and not real increase of production capacity. Most of funds invested by most auto manufacturers in 2009, 2010 to improve their production capacity are probable transformed into usable production capacity in 2011 even 2012.That is, overcapacity of China's auto industry worried by media maybe not exist, for high output of most of the auto manufacturers and auto parts & components is accomplished by overtime rather than expansion of equipment production capacity.

　　Production capacity expansion and investment plan of each auto enterprises reported by media early this year mean it is likely that speed of China's auto industry's production capacity expansion will surpass the growth speed of practical demands of terminal consumer market. As a result, overcapacity of overall entire industry maybe comes after three years. Nevertheless, overcapacity is not always a bad thing, because relative overcapacity can bring about more fierce competition, whose result is can give consumers more cheap and good products and more wide choice space. For instance, Chinese consumers have access to the lowest home appliance price in the world (tax is exclusive) though there exists overcapacity in China's home appliance industry. When it comes to global market, auto industry is supposed to be a low-profit business but profit level of China's auto industry is much higher than the international average level. In all, it is caused by inadequate capacity and competition.

　　Comments of the author: Theory of the turning point is not a new vocabulary, but it can attract attraction wherever used. From April to August in 2010, Chinese car marker maybe emerges the phenomenon of supply more than demand and sales performance of segmentation models in the market will lose balance. In other words, demands for brisk sale models will continue to be big, but most of the models have to do promotional activities and even low their price tag on the terminal market so as to attract consumers. Sales performance in traditional downturn period of Chinese car market will not be the same as good performance of last year. However, it should exaggerate the fact if we think this representing a turning point of China's auto industry.　　(Translator: Qinghua Wade)

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