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.

More by Bertel Schmitt

Comments
Join the conversation
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.

  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
  • Oberkanone Where is the value here? Magna is assembling the vehicles. The IP is not novel. Just buy the IP at bankruptcy stage for next to nothing.
  • Jalop1991 what, no Turbo trim?
Next