By on November 27, 2010

People have accused me of irrational exuberance (or worse) when I mentioned that the Chinese auto market could be 17 million or thereabouts this year. Impending bubbles were predicted. Popping bubbles were (erroneously) reported. Gordon Chang, guest of Glenn Beck whenever Beck needs an Asian that says something nasty about China, even offered the theory that the Chinese government  secretly buys most of the cars and hides them somewhere. (For 17 million, the Gobi desert would come in handy, but then there’s Google maps.)  I stuck by my prediction of 17m or thereabouts.

Well, it turns out I was wrong after all.

J.D. Power, echoed by Automotive News [sub], now predicts that auto sales in China (all vehicles, they don’t have the “light vehicle” category) will grow more than 30 percent to 18 million units this year.

It sure looks that way.

In October,  sales were up 27.1 percent for the month. For the first ten months, auto sales had risen 34.76 percent to 14.68m units and production was up 34.49 percent to 14.62m.

J.D.Power calculated the October SAAR for China (which they don’t have, be careful with that word, they might think it’s SARS) at 19.2 million units.

J.D. Power sees the same trend we reported weeks ago: The Chinese government keeps its people guessing as to what will happen with car taxes and other incentives in the new year. Many Chinese decide to lock in the handouts this year instead of hoping for an uncertain future.

China already stepped on the brakes to avoid an overheating of the economy. Therefore the thinking is that the handouts will end in the new year. Which has the reverse effect of further overheating the economy as people mob the showrooms.

If J.D.Power’s projection will come true, then a world record will be broken. The U.S. had sold more than 17 million cars in the beginning of the millennium, but never more than 18 million. Currently, the U.S. is seen to close out the year with sales of 11.5 million.

In 2011 and beyond, J.D. Power expects China’s auto market “will grow at a somewhat lower rate than in 2009 and 2010.” Now that’s a precise prediction! My gut says it will be somewhere between 10-15 percent. Why? Because the Chinese get nervous when growth dips below 10 percent. And mostly because China has a vehicle density of only 63 per thousand (U.S.: 800 per thousand.)  Lots and lots of room to grow in a country wil a population of 1.3 billion (which will mostl likely turn out to be 1.5 billion when they are done counting thise year’s census.)

Run the numbers: At just 15 percent growth, it will be 21 million cars next year and 36 million a year in 2015. That should be enough to make those happy who had the foresight to enter the Chinese market. GM comes to mind. And speaking of GM,  GM China’s CEO Kevin Wale agrees and also predicts 10 to 15 percent growth for next year.

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18 Comments on “17 Million Cars A Year In China? Forget About It...”


  • avatar
    Robert.Walter

    Maybe the government is hiding them in plain sight, in and amongst all those traffic jams…

  • avatar
    HoldenSSVSE

    No bubble in China.  It’s a nation that adds four-million people to the middle class each month.  Poor families pool their money to buy a new car now and then share it.  This is the largest car economy in the world in a nation of 1.2 billion and growing, 1:5 of the population of the world with what is projected to have 70% of its population living in cities of suburbs in the next  40 years.  The largest industrialized population of the world.
     
    The only thing that would burst this growing market in the short term is if war were to break out on the Korean Peninsula and both China and the United States honored their mutual protection pacts with their respective Koreas.  Then all bets are off.
     
    The big winners (beyond China) is VW and GM as this market grows.  North American car buyers better get use to more and more cars being designed specifically for the Chinese market and being sold as designed back here in the United States, not the other way around.  We’re already seeing it, and it goes far beyond the latest GM Buick offerings.

  • avatar
    AaronH

    As the USA moves rapidly toward Socialism/Fascism with permanent socio-economic rot due to high taxes, government-run Prussian/Dewey education which creates a useless and infantile society, and retarded/parasitic laws, the Chinese are moving rapidly toward individualism. The automobile is a tell-tail sign of personal freedom and prosperity as the USA government trys to con Americans out of their cars and into cattle movers (where they can be dehumanized/humiliated by TSA search and x-ray), the Asians will prosper as individuals in the future.

    • 0 avatar
      forraymond

      Fascism = Republicans
      Socialism = Democrats
       
      Which is worse?  Communism?

    • 0 avatar
      MikeAR

      Actually the Democrat model is more fascism than anything else. That system rewards big business (the tbtf banks) at the expense of the less politically well connected businesses.

    • 0 avatar
      Acubra

      C’mon, Reps establishment is just another face of the same coin. Grass roots is a different matter, but it is too late and they cannot do anything.
      What now happens in the West in general reminds me way too uncomfortably the middle to late 80′s in the USSR. It just happens so much slower here.
      The word “rot” says it all. In 10 years it won’t be a pretty picture, methinks.

    • 0 avatar
      Sam P

      “the USA government trys to con Americans out of their cars and into cattle movers”

      Source? As a car enthusiast, I can confirm that no government is threatening or cajoling me into taking mass transit. Fuel taxes haven’t been hiked to ridiculous levels, the only tolls within 500 miles of me are on a couple of bridges, and it’s possible to find free or very cheap parking anywhere outside of a major urban core.

  • avatar
    thompson2

    My question to the wise and connected Bertel is, can the Chinese infrastucture keep up with the growth in traffic? I know China is a very large country, but a lot of it is rural. In my mind the explosion of growth in the US was driven by mass production first, and years later by the highway/interstate system. Does China have similar infrastructure projects active? I do know thay are working very hard on high speed rail.

  • avatar
    tparkit

    Oh, there’s a bubble in China:
     
    “Fixed-asset investment accounts for more than 60% of China’s overall GDP. No other major economy even comes close.”
     
    http://globaleconomicanalysis.blogspot.com/2010/11/chinas-economic-treadmill-to-hell.html
     
    The highest percentage I’m aware of in the US was in Las Vegas, where it was estimated that 25 cents of every dollar in the economy was real estate-related. Today, the economy of Las Vegas is in ruins.
     
    Be sure to watch the Chanos video at the link.

    • 0 avatar
      HoldenSSVSE

      Not even remotely the same.  The value of real estate in the United States was driven up by people using their homes like ATM machines to tap the equity.  Shady mortgage brokers used shady appraisers to drive values up even higher to loan out even more money to collect more interest and pocket more bonuses and commissions.  The whole house of cards was doomed.
       
      Look at a state like Texas, where using your home like an ATM machine is against the law by state constitution.  Home values didn’t see the huge run up the rest of the nation saw, people weren’t burning up their equity.  The result?  Decline in values in Texas don’t match the rest of the nation and they sit on one of the lowest foreclosure rates in the nation.
       
      You also ignore that during the US boom years that savings rates were right around -2% while the Chinese save over 20% of their income.  The average Chinese citizen is vastly better prepared than the average American for a downturn.  Comparing Vegas real estate speculation to the Chinese economy is just plain silly.

    • 0 avatar
      Sam P

      “Look at a state like Texas, where using your home like an ATM machine is against the law by state constitution.  Home values didn’t see the huge run up the rest of the nation saw, people weren’t burning up their equity.”

      Go TX. Maybe some sane regulation isn’t so bad after all.

    • 0 avatar
      tparkit

      Holden, here’s some background reading:

       http://entext-economics.com/August-IP-CPS.pdf
       
      And a useful comment, from the horse’s mouth:
       
      “Once the bubble pops, our economic growth will stop,” warns Yi Xianrong, a researcher at the Chinese Academy of Social Sciences’ Finance Research Center. On Dec. 27, China Premier Wen Jiabao told news agency Xinhua that “property prices have risen too quickly.” He pledged a crackdown on speculators.
       
      http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arp0XyPoRxW0
       
      One major difference between Las Vegas and China (the world’s most corrupt, bureaucratic nation) is China’s potential for social instability. To preserve its power, the communist party has tried to give the linguistically and ethnically-disparate residents of China a sense of national identity through sports, including the recent Olympics extravaganza. China’s neighbors are worried that, when the economy slows down, the communists will conjure up external enemies so that China can be held together by being placed on a wartime footing.
       
      BTW, do you know much about China’s LGFV system? If not, you can start here:
       
      http://www.businessinsider.com/the-chinese-banking-system-is-seriously-at-risk-2010-7
       
      http://www.businessinsider.com/the-real-risk-with-chinese-banks-their-corporate-culture-2010-7
       
      The guy who wrote those articles is a professor at Tsinghua University’s School of Economics and Management in Beijing, China. Go to his page and scroll down his articles. You’ll especially enjoy the one titled, “A Crucial On-The-Ground Look At China’s Ghost City Of Ordos”

      http://www.businessinsider.com/author/patrick-chovanec
       
       

    • 0 avatar
      OldandSlow

      I live in Texas, where 1 million folks are unemployed and state government has a 12 Billion dollar a year deficit to fix. So, while it may be doing better than Florida or Nevada, Texas definitely felt the effects of this recession.
       
      With regards to China, their savings rate far exceeds that US average.  I’d be interested to know what the percentage of new vehicles that are purchase with cash versus US car buyers.
       
       

    • 0 avatar
      caboaz

      @OldandSlow…  you forgot to mention the 1 million unemployed in Texas are actually people who moved to Texas from California, Michigan, Illinois, Ohio, etc. and never had a job here in the first place!  Our budget deficit is the result of free loading bums from other states coming here in search of work while using public services they never paid for.  As is always the case in this country, the irresponsible are rewarded while the responsible and productive are punished.  In this case the responsible citizens of Texas end up paying the price for the irresponsible citizens of states put out of business by unions and socialist public policy.

  • avatar
    Tree Trunk

    This video reminds me of bus travel in Indonesia good 10 years ago.
     
    What obsessive honking and passing was supposed to accomplish was beyond my understanding since all it did was to get you stuck behind the next car in endless bumper to bumper traffic.
     
    What I found fascinating there was that wrecked cars and trucks were just left on the side of the road.  Some of them had obviously been there for a while and I never understood why the were not rebuild or salvaged for parts.

  • avatar
    George B

    HoldenSSVSE, as of 2003 it’s possible to get money out of the equity of your house in Texas.
     
    http://www.occc.state.tx.us/pages/brochures/home_equity_lending.html#line
    However, you can’t take out a loan for more than 80% of your home equity and you can’t refinance more often than once per year.
     
    In Texas home prices are the sum of the cost of land, building materials, and Mexican labor with no shortages of any of these inputs.  The supply of houses grows easily to meet demand, preventing insane price increases.  Also helps that the population of Texas increases by about 1300 people per day, so the demand for houses has been relatively steady.

  • avatar
    mattfromOz

    Funny also to see that some of the best-selling cars in China are completely unknown to us are they are sold only there. For example, the VW Lavida (?) is the best seller in October and sold more units last month in China than Honda sold Accords in the US… (23,180 vs. 21,451)
    OR that GM’s best selling passenger car in China (the Buick Excelle – 21,492 units in October) sold nearly double the amount if GM’s best selling passenger car in the US! (Chevrolet Impala – 12,389) and still, this is not counting the Buick Rxcelle hatchback version which sold 11,487 units in China, bringing the Excelle total to 32,979…nearly 3 times the sales of the Impala in the US…
    Another one: despite its huge success in the US, Hyundai’s best selling model there, the Sonata, sold less units (17,505 last month) than Hyundai’s best selling model in China: the Hyundai Elantra Yuedong at 18,775…
    Fun stuff!
    The top 75 models sold in China on the below link if you are interested… (also with a photo of the VW Lavida!)
    cheers
    Matt
    bestsellingcars.com


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