Horrors! China Might Only Sell 20m Cars in 2012!
China’s car industry has big plans. According to the China Business Journal, cited by the Nikkei [sub], China’s top 14 automakers are planning and building for a combined output capacity of 23 million vehicles in 2012. “With other carmakers included, the total figure will likely top 25 million,” says the Nikkei.
Last year, China became the world’s largest auto market, with 13.64m vehicles sold. Demand is officially projected to grow by 10-15 percent a year, reaching 20m units in 2012. “Consequently, there is the possibility of excess capacity,“ worries the Nikkei. (They are ostensibly not worried about 20m cars being sold, an idea that makes peak oilers lose precious sleep while they are wearing out their – plastic – keyboards on the message boards.)
As far as this reporter is concerned, 5m excess capacity in 2012 would fall in the „nice problem to have“ category.
One, Chinese projections are notoriously lowballed.
Two, even if the projections will be dead-on, 5m extra capacity on sales of 20m would translate into 80 percent capacity utilization – an o.k. number. Worldwide capacity utilization is currently estimated at 63 percent, if the notoriously inaccurate CSM Worldwide has it right for a change. And who knows, by 2012 China might export at least some cars, which could translate into extra shifts at Chinese plants.
Be it as it may, the ever so watchful Chinese government already has a wary eye on the urge to build, and ordered their big fish to eat some smaller fish first before breaking new ground.
Speaking of sales: January 2010 in the U.S. was pretty much as bad as January 2009, with a slight 6 percent increase, mostly due to fleet sales. January 2010 in China looks like another humdinger. GM China, always a pretty good indicator for Chinese sales , just reported that they doubled January 2010 sales, compared to the same month in the prior year. Industry officials expect that this time around, for the first time in history, China will sell more than a million cars in January.
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As I said many times previously. Demography is Chinese destiny as it is Japan's. Japan was on the verge of becoming the economic world leader in the 80-ties, everybody said so. Now the only question is whether Japan will ever have a vibrant economy again. They haven't had a good economy in 20 years and most likely never will. Beyond demographics another limitation the Chinese face are the actual physical limits of Mother Earth. There isn't enough space, water, air or oil to sustain Chinese expansion of 20 million cars per year for a very long time. Their economy will likely not crash, but it will eventually settle into the Japan-style slow hibernation.