By the end of 2009, China was the world’s largest auto market – something we saw coming nearly a year in advance. When the torrid double digit growth got stuck two years later, a lot of people called a bubble. However, the bubble did not burst. Now, analysts predict a return of the double digit growth.
Ryan Cui, an analyst with LMC Automotive, told China Daily that said his firm “forecasts passenger vehicle sales will rebound to 10.5 percent growth this year and a stable increase will continue in the next four to five years.” Cui doesn’t see “any chance of a decline.”
His colleague Lin Huaibin, an analyst with IHS Automotive, said that a falling market “is impossible” unless the nation’s economic fundamentals change.
The logic behind the reasoning: “About 67 of every 1,000 people in China now have cars, a much lower ratio than Western markets.” Many European countries now have 600 cars per thousand people. America has 800 per thousand. China’s car growth is directly connected ton the economy. Most car sales still are in cash, and Chinese tend to save when darker clouds appear on the economic horizon. As business picks up in China, car sales should follow.
One problem in China: Capacity utilization: A report released by China Galaxy Securities in January said domestic carmakers on average used only 58 percent of their production capacity last year, while joint ventures operate at 90 percent. Lin with IHS said over-capacity could be eased if domestic brands export more. TTAC readers know this since September last year and can save the money for the study.