GM China's November Numbers, And A Deep Look In The Crystal Ball

GM China, our recently no longer so reliable oracle for the Chinese market, raised its November sales by 11 percent, compared to an absolutely batty November 2009. 11 percent are not the same growth as the 109.5 percent GM China had recorded in last year’s November, but how much battier do you expect them to get? The more meaningful number is that for the first 11 months of 2010: From January through November, GM’s China sales jumped 33 percent to a mind-blowing 2.17 million units. GM China will most likely close out the year in the 2.35 to 2.4m area – this is higher than the total sales of some of Europe’s larger countries, and definitely a whole lot more than GM sells back home. Better get used to it.

In November, GM’s Chinese joint ventures moved 196,990 units. Not much change compared to the 199,641 units they sold last month. Back home, GM sold 168,670 units in a very good November.

GM’s passenger-car JV with SAIC, which keeps China supplied with Buicks and Chevrolets, brought in more impressive numbers. Sales are up 33 percent here, setting the stage for news of a very strong overall November market in the Middle Kingdom.

What rained on GM’s parade was Wuling. The econobox maker that helped inflate GM’s Chinese numbers by about a million a year continues to disappoint. Wuling reported only 84,879 mini vehicles in China for November, “without providing a comparison,” as Bloomberg complains.

Lazy, lazy Bloomberg. TTAC can provide the missing comparison. SAIC-GM-Wuling had sold 89,636 mini-vehicles in China in November 2009. We call that a 5 percent decrease. Woolly Wuling hasn’t kept up with the pace of the market lately. They deliver volume and bragging rights to GM, but no growth, and most likely very little profit. And they ruin the percentages everybody is so in love with.

Lazy journos will kvetch that (duh) 11 percent in November is less than 19.6 percent in October. Compared to what, gentlemen? Keep in mind that November 2009 was absolutely nutty in China. Buick sales had risen 118 percent, Chevrolet sales had exploded by 281 percent. Honestly, I had expected overall Chinese sales to fall compared to that absolutely outrageous November 2009 sales orgy. That they did not fall and that they keep on climbing attests to the vigor of this still largely untapped market.

Did I say “largely untapped?” There are a paltry 63 cars per thousand people on China’s roads. In the U.S., there are 800 per thousand. The G7 average stands at around 600 per thousand. China passed Japan as the world’s second largest economy, with a still largely unmotorized population. They all want what we want: A car.

Looking ahead, growth in 2011 will most likely be more subdued in percentages, especially in the first quarter. The government will most likely do away with the tax incentives (who needs incentives in that kind of a market?) People lock them in in November and December. There will be pull-forward.

Still, market observers expect even more growth for 2011. J.D. Power thinks China’s auto market “will grow at a somewhat lower rate than in 2009 and 2010.” GM China’s Kevin Wale prognosticates growth of 10-15 percent more next year. Don’t let those percentages fool you. 10 to 15 percent of 18 million will be 1.8 to 2.7 million more. Or the total sales of a good sized European country.

Bubble? There is none in sight. In the past ten years, China had years close to 5 percent growth and years close to 50 percent growth. On average, China’s car market grew 24 percent per year, and it still has only 63 cars per thousand. Sure, there will be ups and downs, but the general direction of this market is due north. Like any other market, China will start slowing down when it reaches 500 cars per thousand, which I believe to happen some time after 2030. That needs around 750 million cars on the road, or about three times the U.S. number. Scary? Yes. Inevitable? Unless the sky falls, yes.

You think I’m crazy? You thought I was crazy when I started writing for TTAC two years ago, and I haven’t changed.