China's New Car Sales, March 2010: We Were Wrong

Bertel Schmitt
by Bertel Schmitt

A week ago, we swam against the trend of China analysts who predicted a 30-40 percent rise in March new car sales in the Middle Kingdom. By using our patent-pending TTAC forecasting methodology, we projected China’s sales rising between 50 and 60 percent in March. The numbers are in. We were wrong.

Totally wrong was China’s National Passenger Car Information Exchange Association. They had predicted a rise of 40 percent.

The true number? 63 percent. Well, the patent-pending TTAC forecasting methodology (use GM’s China sales – 68 percent up in March – and subtract a few points) had indicated sales above 60 percent. But we chickened.

March sales in China totaled 1.26 million passenger cars, up from 942,900 sold in February, according to data provided by the China Association of Automobile Manufacturers [via Reuters.] These are passenger vehicles, excluding commercial vehicles, which could add another 250,000 to 300,000 to the number. Figures of China’s total auto sales in March should be released early this coming week. (Our patent-pending formula is heavily overweight with Wuling vans.)

The March number is even more surprising as we are comparing to a high base in March 2009, when Chinese sales begun to skyrocket. This augurs for a record year. If the trend continues, China could break the all time sales record of 17.4m units sold in the U.S. in the year 2000.

Rao Da, general secretary of the China Passenger Car Association, agrees: “We are confident that China’s vehicle sales will surpass 17 million units this year, growing by about 25 percent.”.

Sales for the first quarter January-March are up 76.3 percent from a year ago, at 3.52m.

Forget any bubble talk. This is not a market where a couple has three cars in the garage. China has just begun to motorize. There are 1.3b to 1.5b people in China. It’s like a dry sponge sucking up water. An estimated 400m to 500m already can afford a car. That number is rising rapidly.

Jack Perkowski, China visionary and author of the book Managing the Dragon, wrote a few months ago:

“China’s auto industry will continue to show rapid rates of growth for many years because China’s total demand for transportation is already much bigger than most people think. I would argue that China’s transportation industry is actually 50 million vehicles per year, not the 13.6 million vehicles sold in 2009, or even the 15 million vehicles that might be sold this year. They represent only one part of the market.”

That other part are motorcycles, farm engines, and three-wheelers with a one cylinder engine diesel engine. Once these people have the money, they buy a car.


Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Chris Coulter Chris Coulter on Apr 09, 2010

    @wsn "It is a bubble." I have an easier way to tell that it's a bubble: Once everyone says "forget any bubble talk" and "record" this and that and starts posting asinine videos of rockets shooting skyward and graphs bursting out of the confines of the graphic - like those magazine covers about the real estate market in the U.S. a few years ago - you know it's a bubble about to burst.

    • See 1 previous
    • Porschespeed Porschespeed on Apr 09, 2010

      The graphics on magazine covers are a great way of analyzing the trend. I remember arguing with people that beyond price inflation due to low borrowing rates, there was no justification for the rest of the real estate price increases. Real wages did not increase for the average American, so how could housing keep going up?

  • Bertel Schmitt Bertel Schmitt on Apr 09, 2010

    Folks, some here make the same old mistake: Just because we have something, the rest of the world should have it too. Real estate bubble in China: Definitely. Has been here for years and getting worse. It's more an insanity than a bubble. People buy, apartments and offices stay empty. Vacancy rate is huge. I would NEVER buy real estate in China. You don't own the ground, you rent it from the government. The ground appreciates, the structure depreciates - especially in China. Indicator: While house prices explode, my rent has been flat for 5 years. Chinese Car bubble: Not at all. 800+ cars per thousand (USA) = huge bubble 500 - 600 cars per thousand (developed countries) = saturated market 80 cars per thousand (China) = the beginning of motorization

  • Cprescott Fisker is another brand that Heir Yutz has killed.
  • Dwford Every country is allowed to have trade restrictions except the US.
  • 1995 SC Are there any mitigation systems that would have prevented this though? We had a ship hit a bridge in Jacksonville a few years back and it was basically dumb luck it didn't collapse. This looked like a direct hit.
  • Cprescott Oh, well.
  • 28-Cars-Later "The Chinese Ministry of Commerce claimed the Inflation Reduction Act is “discriminatory”"This what your mainstream social communism has wrought: a foreign power, major geopolitical rival and the #1 global industrial competitor cries "racism" when an act of Congress in any way presents a challenge - and the saddest part is there are Americans who will process this claim and agree if only in their own minds. To be clear, Wo xihuan Zhongguoren but the under 40yo PRC raised Mainlanders I've interacted with do believe they are a master race - but that's fine right?
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