By on February 4, 2010

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.

Get the latest TTAC e-Newsletter!

8 Comments on “Horrors! China Might Only Sell 20m Cars in 2012!...”


  • avatar
    ohsnapback

    China is the biggest bubble to have ever existed, period.

    Watch, wait and see. Although some will mock this prediction, I’ll be more than looking forward to revisiting these comments sections of TTAC when the hammer falls on China, which has literally been propping up its domestic economy by forcing its domestic banks to lend, lend, lend, and telling consumers to spend, spend, spend, since Chinese exporters can no longer count on European and U.S. consumers (and since they can’t make up for such loss with Japanese and Korean consumers, whether in the short or long term).

    Yes, the current state of Chinese bank lending is our version of mortgage underwriting during our housing bubble x 100.

  • avatar

    1.) The immediate demise of China has been predicted longer than I lived here (and I did for quite some time.)
    2.) Interest is being tightened, real estate is coming down
    3.) In China, the vast majority of cars are NOT paid on credit, they are paid with cash.
    4.) The Chinese have some of the highest personal savings rates in the world.
    5.) China has vast foreign reserves. The USA has vast foreign debt.
    6.) China took their stimulus money pretty much out of petty cash and is using it to build stuff: Roads, railways etc. In a few years, China will have more high speed rail miles than Europe which had been on it since the steam locomotive was invented. The USA borrowed their stimulus money (from China for instance) and used it to prop up failed banks and failed auto makers. Not to forget two disastrous wars.
    7.) China’s exports have been rebounding strongly for all of 2009. So have its imports by the way.
    8.) If you want to see a bubble, then look at the more than 800 cars per thousand in the U.S. No wonder that bubble burst painfully when the easy credit in America evaporated. 60 cars per thousand in China is no bubble. It’s a start.

    Every day I thank my creator that I sold my waterfront property in the Hamptons in 2006. The saved real estate taxes alone pay for a swank apartment in the middle of Beijing.

  • avatar
    rnc

    Bertel – Take all of the comments you made (below) and replace “China” with “Japan 20-30 years ago” and they would apply as well. Look at Japan’s current economic situation you can see the long term issues China is facing by building it’s economy in the exact same fashion. Not saying it will crash, but the model has already been tried.

    3.) In China, the vast majority of cars are NOT paid on credit, they are paid with cash.
    4.) The Chinese have some of the highest personal savings rates in the world.
    5.) China has vast foreign reserves. The USA has vast foreign debt.
    6.) China took their stimulus money pretty much out of petty cash and is using it to build stuff: Roads, railways etc. In a few years, China will have more high speed rail miles than Europe which had been on it since the steam locomotive was invented. The USA borrowed their stimulus money (from China for instance) and used it to prop up failed banks and failed auto makers. Not to forget two disastrous wars.
    7.) China’s exports have been rebounding strongly for all of 2009. So have its imports by the way.

  • avatar

    My wife is Japanese. I am in Japan a lot. As a matter of fact, I will be posting from Tokyo staring next Thursday for three weeks.

    Every time I am there and walk down Ginza, I wonder whether people received the memo that their economy had been in the tank for 30 years. They seem to be oblivious. The ladies are elegant. Car sales are up. A taxi from downtown to our tiny 1 room apartment (which would cost as much to rent as my Beijing duplex if my wife’s dad, bless his heart, wouldn’t be in real estate) costs $100.

    In any case, China is far, far removed from where Japan was in 1989. Think of China as America sometime in the middle of the 19th century, but with 65 times the population.

    All economies go through boom and bust cycles, it’s the nature of the beast. China has just started. Actually, China seriously started to grow basically around the year 2000. The changes I have witnessed in the last 4 years are staggering. Yet, there are vast stretches of land where the changes are just beginning.

    The Chinese economy had various crashlets. The Asian finance crisis. SARS. Largely unnoticed by the West, the Chinese economy had started contracting in the beginning of 2008, because the government had slammed on the brakes. First to go down, first to go up again. Just look at the Shanghai index (up,) overlayed with the Dow (below). Doesn’t look like a bubble to me.

  • avatar
    rnc

    And the prius recall begins…..

  • avatar
    LaurentCauch

    Drove my Chery to the lery but the lery was dly…

    I guess it’s better in Mandarin idiom.

    • 0 avatar

      Actually, the Northern Chinese (such as in Beijing) have no problem at all with L and R. They are famous for their rolling Rs …. And famous for “No problem!”

      The Japanese on the other hand … I tease my wife all the time. Then she retaliates, makes me say “Why is the Visa card so weird?” and laughs her beautiful Japanese head off when this Teutonic reporter says it.

  • avatar
    ra_pro

    As I said many times previously. Demography is Chinese destiny as it is Japan’s. Japan was on the verge of becoming the economic world leader in the 80-ties, everybody said so. Now the only question is whether Japan will ever have a vibrant economy again. They haven’t had a good economy in 20 years and most likely never will.

    Beyond demographics another limitation the Chinese face are the actual physical limits of Mother Earth. There isn’t enough space, water, air or oil to sustain Chinese expansion of 20 million cars per year for a very long time. Their economy will likely not crash, but it will eventually settle into the Japan-style slow hibernation.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • J & J Sutherland, Canada
  • Tycho de Feyter, China
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India