Huge Demands May Push Auto Market to Grow

　　In 2010, the situation of China's economy is quite complicated. Now we are in the middle of this year. Two major problems of China's economy have emerged. First of all, as the barometer of economy, China's stock market has become the worst one in the world. Secondly, the property market has reached a critical point. The game between both sides will see the outcome. Under huge pressure the house prices dropped. Therefore there are some pessimistic views about China's economy. Such kind of sentiment also affected Chinese auto market. With the emerging of pessimistic views, people may not feel optimistic about the situation of Chinese auto market in the second half of 2010. The great changes which took place in May have fully illustrated this point.

　　Shen Yuxiang recently said that Chinese stock market had suffered from continuous downturn and government had also issued several policies to regulate property market. People are afraid that world's economy may hit the bottom once again. The domestic and international economic situation has become severe again, which will definitely affect Chinese auto market. Therefore people should be prepared to face the challenge.

　　Shen Yuxiang believed that the most prominent problem is excess capacity. In August and September of 2009, Shen Yuxiang wrote two articles focusing on excessive capacity, foreseeing that excess capacity will be inevitable in the second half of 2010. Now Shen Yuxiang's predications have become truth. In addition, in last month, Shen wrote another article, pointing out that in the second half of 2010 dealerships will shoulder the pressure caused by inventory.

　　Once dealerships hold greater inventories, the price war will be inevitable. The competition in auto market is going to heat up again. The hot scene of sales has passed.

　　However, though the situation of China's or world's economy is extremely complicated in 2010 and there are some problems, Shen Yuxiang believed that the overall orientation of Chinese economy is positive. Thus there is no need for us to hold a pessimistic view towards the situation of auto market.

　　Shen Yuxiang has said repeatedly that Chinese auto market is different from that in other countries. Now China's auto market has entered a growing circle and there are abundant demands. In terms of car ownership per capita, China's auto consumption still has big space to grow. Currently China's car ownership is that one thousand people have 36 cars, which is in the same level of South Korea's auto ownership in the year of 1989. China's level is far below the global average level-120 units for one thousand people. For China, the greatest force of domestic demand is urbanization. Over the past ten years, with the rising of urbanization rate, auto ownership is also increasing. Those two indicators are highly correlated. From this point of view, in the middle and western areas where urbanization rate is quite low, there are greater potentials for growth.

　　The sudden change in auto market is just like a person's sneeze. After a period of time everything will become better. Shen Yuxiang believed that though in recent two months production and sales dropped, the overall performance of auto market in 2010 is still worth people's expectations.

　　It is said that recently a large number of securities analysts offered advice to buy auto stocks. Those analysts believed that in 2010 China's auto industry can grow by 30%. Some statistical data shows that till now a total of 49 listed automakers have released the predication report of the first half. Except for two ST companies and an automaker whose prediction is dropping, 19 automakers believe that their business will grow. Based on the information provided by manufacturers of truck, Foton Motor, China's Heavy Truck and Weichai Power and other corporations said they received a lot of orders and the sales of third quarter will drop two much.

　　It is worth mentioning that the recovery in exports also brings new excitements for Chinese auto market. According to the exports statistics of the first five months which were released by China Automotive Technology& Research Center, in May China exported 44,400 units of cars, up 2.24% compared with last month and 45.09% year on year. In the first five months of 2010, China exported 194,200 vehicles, up 52.54% year on year.

　　To sum up, as to China's auto market, the great demand has laid a solid foundation for the development of auto industry. Once the there are positive economic signs, Chinese auto market will take the lead to achieve good performance. (Translator: Qinghua/Hanxin)

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