17 Million Cars A Year In China? Forget About It

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.