China’s car industry has big plans. According to the China Business Journal, cited by the Nikkei [sub], China’s top 14 automakers are planning and building for a combined output capacity of 23 million vehicles in 2012. “With other carmakers included, the total figure will likely top 25 million,” says the Nikkei.
Last year, China became the world’s largest auto market, with 13.64m vehicles sold. Demand is officially projected to grow by 10-15 percent a year, reaching 20m units in 2012. “Consequently, there is the possibility of excess capacity,“ worries the Nikkei. (They are ostensibly not worried about 20m cars being sold, an idea that makes peak oilers lose precious sleep while they are wearing out their – plastic – keyboards on the message boards.)
As far as this reporter is concerned, 5m excess capacity in 2012 would fall in the „nice problem to have“ category.
One, Chinese projections are notoriously lowballed. In 2008, during the worst of carmageddon, China still came in with a growth of 6.7 percent. The number alarmed the Chinese. They were used to double digit growth rates. Still, growth was growth. In the U.S. sales dropped by 18 percent in 2008. In 2009, Chinese sales shot up by 45 percent, whereas the U.S. dropped another 21.2 percent.
Two, even if the projections will be dead-on, 5m extra capacity on sales of 20m would translate into 80 percent capacity utilization – an o.k. number. Worldwide capacity utilization is currently estimated at 63 percent, if the notoriously inaccurate CSM Worldwide has it right for a change. And who knows, by 2012 China might export at least some cars, which could translate into extra shifts at Chinese plants.
Be it as it may, the ever so watchful Chinese government already has a wary eye on the urge to build, and ordered their big fish to eat some smaller fish first before breaking new ground.
Speaking of sales: January 2010 in the U.S. was pretty much as bad as January 2009, with a slight 6 percent increase, mostly due to fleet sales. January 2010 in China looks like another humdinger. GM China, always a pretty good indicator for Chinese sales, just reported that they doubled January 2010 sales, compared to the same month in the prior year. Industry officials expect that this time around, for the first time in history, China will sell more than a million cars in January.