Horrors! China Might Only Sell 20m Cars in 2012!

Bertel Schmitt
by Bertel Schmitt

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. In 2008, during the worst of carmageddon, China still came in with a growth of 6.7 percent. The number alarmed the Chinese. They were used to double digit growth rates. Still, growth was growth. In the U.S. sales dropped by 18 percent in 2008. In 2009, Chinese sales shot up by 45 percent, whereas the U.S. dropped another 21.2 percent.

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.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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3 of 8 comments
  • LaurentCauch LaurentCauch on Feb 04, 2010

    Drove my Chery to the lery but the lery was dly... I guess it's better in Mandarin idiom.

    • Bertel Schmitt Bertel Schmitt on Feb 04, 2010

      Actually, the Northern Chinese (such as in Beijing) have no problem at all with L and R. They are famous for their rolling Rs .... And famous for "No problem!" The Japanese on the other hand ... I tease my wife all the time. Then she retaliates, makes me say "Why is the Visa card so weird?" and laughs her beautiful Japanese head off when this Teutonic reporter says it.

  • Ra_pro Ra_pro on Feb 04, 2010

    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.

  • Theflyersfan There's still the serious lingering doubt or fear about sinking so much money into an electric VW, a company notorious for having epic gremlins in that area. Honestly, I want to see long-term, at least 80,000 miles, examples and how they held up. Maybe then.
  • Lorenzo They were willing to go against their customers' preferences to satisfy government, but now that they see it doesn't pencil out, they change their tune. Now is the time to tell 'em what we really want.
  • Tassos Generally I prefer that exploited labor remain domestic like in the service and trade industries. Given the complex and global integration of supply chains and materials sourcing I accept that most manufacturing must be managed by foreign 'kapos'.
  • Lorenzo 1 million barrels is 42 million gallons. The country uses 368 million gallons a DAY. The reserve was set aside after Hurricane Sandy caused a gasoline shortage for emergency vehicles. The hurricane season starts on June 1 and is predicted to be active. Nice going.
  • Chuck Norton Toolguy- I have. It's hard on the knees...