Auto Consumption Surges in Suburbs Shanghai

　　In 2009, more than 200,000 passenger cars in Shanghai got licenses, up 17% compared with 2008. The average amount of vehicles which got licenses per month was 19,000 units. In September-a hot period for auto sales, more than 25,000 licenses were issued.

　　Market demand grew fastest in suburban areas.

　　Where there is demand there are markets. In the past the layout of auto dealerships in Shanghai had not been established completely. The potential demands in suburbs were not noticed by people. Zhang Hui, the Managing Manager of a Guangzhou Honda 4S dealership in Shanghai said:” Five years ago our Guangzhou Honda 4S dealership was the fourth 4S shop in the district of Songjiang. At that time there were few 4S dealerships. Now in Songjiang you can find a number of 4S dealerships. There are about 20 ones, including those which have not been opened. In this area you can find nearly all auto brands' dealerships."

　　According to an anonymous source from Shanghai Volkswagen, for a mature automaker, the development of dealership network is a long-term work, which will not change in accordance with the market's volatility. A market cannot keep a good situation all the time. Sometimes it may perform badly. Automobile manufacturers' medium and long term plan of dealership network will expand based on some rules. Where there is blank space and consumption demand, Shanghai Volkswagen will extend its network to that place. Although Shanghai Volkswagen has already had 34 4S dealerships (not including some secondary dealers), they have noticed that in Jinshan and Chongming district there is market demand. Shanghai Volkswagen will extend its business to those areas.

　　Press Watch: Now in first-tier cities, sales growth is slowing. The importance of second and third-tier markets is beginning to show up. More and more auto manufacturers and dealers are paying close attention to the development of second and third-tier markets which bear the hope of automakers and dealers. According to related statistics, the market share of second and third-tier markets nearly accounts for 30% of the whole country. In Shanghai, Beijing and other large cities, car ownership is close to saturation. Therefore second and third-tier cities have become a new force driving the new ground of upgrade for auto market. Compared with the city area of Shanghai, Jinshan, Fengxian, Songjiang, Chongming and other suburb areas are equal to second and third-tier markets. We cannot ignore the importance of those markets.

　　Completion of annual sales in three quarters

　　A large number of consumers flocked to Shanghai Tanda Motor Service Co., Ltd. located in Yangpu District to choose a car on October 24, 2009. Many of them are young couples. A lady surnamed Chen was sitting in Roewe 550 and having a look at the interior conditions.

　　Mr. Wu, the Sales Manager of Shanghai Tanda Motor Service Co., Ltd. said:" The main force for sales is the family car with a price around 150,000 yuan. In July, August and September, the auto sales are pretty good. We nearly sold 70 to 80 vehicles every month. We are running a new dealership which has been open for less than one and a half years. In other mature automobile dealerships, the sales are even better."

　　The excellent sales were accompanied by another great event. Upon the arrival of the 60th anniversary of People's Republic of China, Chinese automotive industry ushered in a new chapter. China's auto production totaled ten million units. The remarkable one was manufactured in the city of Changchun. China's automotive industry broke the record of ten million units for the first time.

　　Production is the fundamental performance of a country's power in automotive industry. From zero to ten million units, Chinese auto industry has achieved great progress. And the sales provide support for production.

　　The auto manufacturers which can complete the annual sales target in three quarters are not rare. For example, the Volkswagen, including Volkswagen Group (China), Shanghai Volkswagen and FAW Volkswagen, delivered a total of 1061964 units to the customers in China's mainland and Hong Kong, up 37.0%. The sales have already surpassed the annual sales in 2008.

　　According to the Youth Daily, the sales in Shanghai's major 4S dealerships are also increasing. Fei Xiaomei, the Vice Director of Jiading District recently said:" Jiading District is the auto town of Shanghai. Suofute handed in over 130 million yuan as taxes every year. Automotive industry accounts for 25% of Jiading's fiscal income, though the taxes paid by Volkswagen are not included. The research and development base for new energy vehicles covering an area of 9.5 square kilometers is located in Jiading. We have established a relatively complete industrial chain including car culture, car trade and other parts.

　　80% of the consumers are first-time buyers.

　　During the global financial crisis in 2008, world's car sales suffered from rapid shrinking, including Chinese market. Therefore, in order to promote automotive consumption, China introduced several polices including tax concessions for the purchase of cars and promoting the auto sales in rural areas. Those policies brought instant effects and Chinese auto market was fully activated. In 2009, the vehicle production finally broke the record of ten million units.

　　Manager Wu told the Youth Daily that 80% of the consumers bought the car for the first time. Their main reference was whether the shape and configuration of a car can meet their expectations. Fuel economy will also be taken into consideration. For the first-time buyers, the specific performance of a car is not a key factor.

　　Manager Nie of Shanghai Hengchang Automobile Sales Co., Ltd. - a 4S dealership of Hainan Mazda told reporters from Life Weekly that "a higher price versus performance ratio, a low price, lower fuel consumption and better configuration are consumers' main needs". The Youth Daily learned that as a dealership for Hainan Mazda, Hengchang achieved eye-catching performance in terms of sales, especially for the classical model-Mazda 323. The sales of Familia were much more outstanding. It is reported that Familia is one the few models which can obtain sales of over 500,000 units. Manager Nie pointed out that related stimulus polices introduced by government would play a certain role in promoting auto market, especially for the sales of mini cars with a small-displacement engine. It is reported that those polices promoted the auto sales in some small cities and rural areas. At the same time, the policies propelled the auto prices to become lower.

　　Good policies will play a significant role in promoting the sales of mini cars. Manager Zhou of Shangahi Zhajie Automobile Sales Co. Ltd. told reporters that since the introduction of relevant stimulus policies, the vehicle sales in August and September surged with a significant increase. The growth reached up to 26%. The Youth Daily learned that Zhajie sold more than 30 units of Changhe Suzuki models in one month. Those models usually sold for 40,000 to 60,000 yuan.

　　Consumption is no longer limited to ordinary cars.

　　With the auto market becoming more and more mature, people's demands for cars may also vary. Majority of consumers are first-time buyers. In addition, many people's consumption demands have changed from ordinary cars to special needs.

　　The market of station vehicle and business sedan has come into being. Zhongou Auto Sales Co., Ltd. runs the business of amending and selling three models of Mercedes-Benz recreational vehicles. Manager Xiao told reporters that the prices of three models covered a range from 1,088,000 to 1,280,000 yuan. Their customers are usually billionaires and not so sensitive to the price of a car. “We usually sell a larger number of cars in auto shows. Recently the market conditions are pretty good. Every month we can sell five to eight Mercedes-Benz high-end recreational vehicles.”

　　In addition, statistics show that passenger cars produced by domestic brands rank first as to the car ownership with the sales totaling 3,197,700 units, up by 57.42%. The sales accounted for 44.16% of the whole passenger car sales. According to the data provided by Chery, Chery Automobile sold 337,600 cars in the first nine months of 2009, account for 80.6% of the annual target. Chery is confident to seize more market shares and pursued a better annual result. In the first three quarters of 2009, BYD sold nearly 300,000 units, which are equal to 75% of the annual sales target-400,000 cars.

　　On one hand, China has more and more consumers who intend to buy a car. On the other hand, there are more and more brands and models in the market. A lot of insiders believed that the competition intensity in China's auto market ranked first across the globe.

　　Thanks to a hot consumption market, most automakers have earned profits though the competition is fierce. (Translator: Qinghua/Hanxin)

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