By on April 16, 2010

It seems like the Chinese government is getting worried a bit about what Greenspan would have called „irrational exuberance“ in the Chinese auto market. If Greenspan would have worked for the Chinese. Would have been interesting. Anyway …

A few days ago, Dong Yang, vice president of CAAM, warned that the industry should be careful about possible overproduction and be prudent when planning to expand production capacity. In the first quarter of 2010, Chinese bought a record 4.61m units, up 71.78 percent year on year. Rao Da, general secretary of the China Passenger Car Association, is confident “that China’s vehicle sales will surpass 17 million units this year, growing by about 25 percent.” But colleague Dong warns that auto markers should be prudent and not make forecasts based on the current growth rate.

A few days later, the government made an attempt to curb the appetite for new cars by raising (government controlled) gasoline prices.

Today, The Nikkei [sub] reports that auto industry inventories in China are believed to be mounting. “In early April, inventories at Chinese automaker BYD Co.’s Beijing dealerships were about double year-earlier levels. A senior official at one of the dealerships says that it has been unable to achieve sales targets since the second week of March.”

Consumer spending in major urban areas is said to be slowing, fueling concern about future.

Growth rates of more than 72 percent are clearly unsustainable. If the Chinese car market settles into its usual 15 to 25 percent growth rate, it still will be well ahead of everybody when the year ends.

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27 Comments on “China Applying Brakes To Auto Market...”


  • avatar

    Eventually, Chinese people will need SCUBA gear to breathe over there. The pollution there is unreal. I’m almost not looking forward to going back this year.

  • avatar

    Flashpoint: You’ve said the same thing before. You should look forward to going back here. At least in Beijing the air got markedly better. You’ll be surprised. I’m having a clear view at a wonderful nightly skyline.

    • 0 avatar
      xyzzy

      It’s been a while since I was there (fall 2006) but what amazed me about the pollution in Beijing was how responsive it was to short term events. The air would be unbreathable all week, and then by late Saturday morning, beautiful blue skies, then back to gray and ugly by Monday afternoon. I didn’t notice any strong winds or anything else what would easily explain how the pollution went away so fast.

    • 0 avatar

      In the years before the Olympics it was absolutely awful. You should come now. Air fine. If your car doesn’t pass Euro 4, it’s not allowed into the city.

    • 0 avatar

      XYZZY

      Pay attention to the precipitation and the visibility. In Shanghai, visibility virtually never goes beyond 3 miles. The rain is what gets the particulate matter out of the air and Shanghai as well as many other provinces get plenty of rain.

      I had to do a Geology project in China and tracked things like this.

  • avatar
    rpol35

    Flashpoint, you are certainly right. It’s a point that I have argued for a long time; there are good things about not being number one in automobile sales. A massive air pollution problem is just the tip of the iceberg.

  • avatar
    bmoredlj

    It certainly wouldn’t hurt to try to curb over-inflation of the Chinese fleet before adequate infrastructure is in place to accommodate the volume. If I count correct, the photo in the highway has 24 lanes and looks full. I don’t know when that was taken or whether it’s a highway in China, but if they sell too many cars too fast, it’ll look like that everywhere.

  • avatar
    Contrarian

    1.4 billion people can’t possibly have the same % of car ownership we have in NA and Europe. It’s a social nightmare and an environmental disaster in the making.

    • 0 avatar
      BDB

      In urban planning there’s the idea of a tipping point where the costs of private car ownership outweigh the benefits. The classic example in the US of this is New York City. The Chinese could see that on a nation-wide level, especially given that their dense population (very much unlike the sprawling USA) is ideal for effective, quality mass transit.

    • 0 avatar

      So when the U.S. has more than 800 cars per thousand, and Europe has in many places more than 600 cars per thousand, then that’s o.k.

      If the Chinese have more than the 70 cars per thousand they have now, then suddenly it’s a social nightmare and an environmental disaster. Tell me why.

      Don’t we all want more freedom for the Chinese? How about the freedom to choose a car?

    • 0 avatar
      psarhjinian

      If the Chinese have more than the 70 cars per thousand they have now, then suddenly it’s a social nightmare and an environmental disaster. Tell me why.

      Scale. Seventy per thousand at 1.2 billion total versus 800/thousand at 330 million. To be fair, it’s more of an impending than an immediate disaster: they won’t surpass the US until they reach 190/thousand. Do you think they’ll reach that? I do, and I think they’ll blow right past it.

      China’s advantage** is that they can force the kind of large-scale economic changes that more laissez-faire nations won’t always reach until things are far more untenable. There’s much more potential will to move to electrification, more sensible urban planning, etc.

      This is, of course, assuming the will is exercised. The government didn’t do squat about air quality until the Olympics and it’s associated coverage threatened embarrassment. It’s a double-edged sword, a command- (or pseudo-command) economy is: when it fails, it’s for the same reason as a market-based economy does, only instead of the market not being sufficiently prodded to drive change, it’s because the planners aren’t motivated.

      ** If you could call it that. I do think it’s an advantage, but I’m a pinko nanny-statist freedom-hater.

    • 0 avatar
      BDB

      @Bertel–

      The same reason why it would be a disaster if Manhattan had the same level of car ownership as Hicksville, USA. Every family having one car per person (sometimes more than that) isn’t a big deal there, but it would be a nightmare in Manhattan. It’s not difficult to understand why.

      Of course most people in NYC don’t want to have a lot of cars, or even own one at all. It’s too much trouble and not really needed anyway, whereas in Hicksville you literally can’t get food or go to work without an automobile. It’s self-limiting (but proper urban planning helps, too).

    • 0 avatar
      educatordan

      @BDB Hicksville is doing just fine thank you. :P

      http://www.hicksvilleusa.com/

    • 0 avatar
      Contrarian

      Bertel,

      I said they couldn’t manage ‘the same %’ of car ownership as in the US or EU. The figures you quoted are just over 10% of ours here. Imagine 10 times more cars on the road in China. I wouldn’t wish that upon them – and I’m no China hater. And our dependance on cars has had plenty of downside – even with our relatively “sparse” populations.

      “So when the U.S. has more than 800 cars per thousand, and Europe has in many places more than 600 cars per thousand, then that’s o.k.

      If the Chinese have more than the 70 cars per thousand they have now, then suddenly it’s a social nightmare and an environmental disaster. Tell me why.”

    • 0 avatar
      George B

      Contrarian, I wouldn’t consider millions of Chinese people buying a car to gain more freedom of movement a “social nightmare”. It will make it harder for the government to keep rural people down on the farm and city people packed together, but wouldn’t a potential increase of liberty and economic opportunity be good for the Chinese people? Regarding the potential for car ownership to be an environmental disaster, the Chinese have the advantage of learning from our mistakes. Assuming the new cars use state of the art pollution control systems, their future doesn’t have to be a smoggy one.

  • avatar

    What road is that in the photo? I always thought the widest highway in the world was Highway 401 in the Toronto-Mississauga, Ontario region (18 lanes wide plus ramps for a few kilometres). Unless this is a relatively short urban road, this road may well win the title since it looks like it’s a couple of lanes wider.

    • 0 avatar
      Highway27

      If it’s a real road, it’s 17 lanes through, then 2 on the ramp on the left side, and 4 on the ramp on the right side (or maybe that road on the right goes underneath the mainline).

      I would love to know where it is, tho, and take a look on Google Earth, to prove it to some of my colleagues. :)

    • 0 avatar
      dhanson865

      I’m pretty sure its a photoshop but it probably isn’t too much of a stretch from the widest road (per the Wikipedia entry).

  • avatar
    chonralda

    According to our friend Wikipedia (http://en.wikipedia.org/wiki/Highway#World_record_highways):

    “Widest highway (maximum number of lanes): The Katy Freeway (part of Interstate 10) in Houston, Texas, has a total of 26 lanes in some sections as of 2007. However, they are divided up into general use/ frontage roads/ HOV lanes, restricting the traverse traffic flow.”

    “Widest highway (maximum number of through lanes): Interstate 5 along a 2-mile section between Interstate 805 and California State Route 56 in San Diego, California, which was completed in April 2007, is 22 lanes wide.”

  • avatar
    porschespeed

    “If Greenspan would have worked for the Chinese. Would have been interesting. Anyway …”

    Greenspan may have occasionally squeaked tiny little whimpers about the college party goers overdoing it, but he never shut down the tappers, and never stopped laying down the rails.

    About 6 in the morning they set the house on fire. Poor Alan couldn’t figure out how it happened. But after much reflection, he has come to the incredibly enlightened conclusion that “mistakes were made”.

    @Bertel,

    Wanting more freedom for the Chinese has nothing to do with them choosing to own a car. In the darkest days of the USSR, you were free to choose to own a car. (10 year wait, but you were free to choose.) China’s admittedly a bit better than the old USSR, but not much.

    Sure, you can buy pretty much anything, but try a flashmob street protest. Or Googling anything. Or printing an investigative piece in the newspaper. Or suing the Party for a collapsed school building. Or be a company that is silly enough to wish to sell legal product the Politburo doesn’t want you to sell (Hummer).

    Or choosing the number of children you have.

    Personally, I like ‘one child’ as a way of ratcheting down the population of the whole planet down to a sustainable level, and for a host of other reasons. But, I don’t think it’s the government’s place to enforce that. At least, absent a popular vote.

    But back to freedom to own cars… Does anyone with even the dimmest spark of analytical ability believe the planet can support another billion cars on the road? Not the Chinese living the rest of their lives like we do in the West, merely them owning and operating a billion (or even 500 million) vehicles? The infrastructure needs alone would require a medium-sized country.

    • 0 avatar

      I give the Chinese 700m cars in 20 years. Probably earlier, but I’m hedging my bets. Another 600m in India, a few years later.

    • 0 avatar
      porschespeed

      Even if those 1B cars were to run on hydrogen, generated from solar electric powered hydrolysis, just the building of said vehicles and the infrastructure to support them will be an unmitigated environmental disaster.

      As hydrogen isn’t even in the game, what happens to oil? Let’s just pretend that on average, they burn 1/2 of a gallon per day. -that’s an incredibly low figure, but let’s see what happens.

      500MM gallons of gas per day
      182.5B gallons gas per year
      Best yield from a bbl of oil is about 20 gallons of gasoline
      Soo, about 9.125 billion barrels of oil. Per year.

      That’s a rosy scenario.

  • avatar

    The population of China is about 1.5 billion.

    The density, on average, is about 5x that of the USA. But the devil is in the details. I think China has more desertified areas, which push its population into smaller areas, but (although I haven’t been there) I suspect that the density of a lot of their urban areas is similar to the Boston-WAshington corridor, and the southern UK.

    Given how much people want cars–even Manhattan has a very significant car population–and how much they don’t like public transit, I suspect that China’s car population will keep rising unless economics, or their government (possibly due to environmental costs) puts a lid on it. India (population 1.2 billion)–same thing.

    But it takes abysmal driving conditions to get people out of their cars and into transit.

    By the way, the US is projected to add another 140 million by 2050 (82% of that due to mass immigration, according to the Pew Research Center). That’s going to put a big crimp on driving (and much else) in a lot of places.

    • 0 avatar
      wsn

      The population density of Japan is 2.5x that of China. And that Japan being a mountain island country doesn’t help.

      China will be fine, if the government doesn’t do stupid things (but that’s unlikely).

    • 0 avatar

      Actually, the motorization in the tier 1 cities is already far progressed. Beijing, a city of some 18m, already has 4m cars. That’s 222 per thousand. It took them two years to go from 3m to 4m. It looks like it will take them a year to go to 5m. As far as size goes, the Beijing municipality is somewhere between Connecticut and New Jersey. The 6th Ring Road around Beijing is 170 miles long.

  • avatar
    ttacgreg

    Just an off the wall comment, no substantiation, but just saying . . . . . .
    About the time of the last energy “crisis” in the early 80’s, I saw in print one person’s definition of a true energy crisis. that would be just 50cc mopeds in the hands of all those mega millions of Chinese people. The demand for petroleum they would create would overwhelm supply.

  • avatar
    atlas_snored

    A lot of you guys are just simply regurgitating the biases you’ve encountered in the media. But then there will be denial and then indignation and counter-accusations. The media shows all sorts of dystopian prognostications for Chinese cities, but they flat out ignore domestic urban development. Simply put, contemporary development in North America has been geared towards the profits of one group, with the costs borne by captive taxpayers.

    At any rate, China most likely won’t morph into a facsimile of the auto-centric transit planning of North America, Australia, or neo-liberal post industrial Europe. Barring an economic collapse or a catastrophic change to neoliberal development policies, Chinese cities will have working public transit systems (think, German and Japanese cities vs. American urban areas built within the past 50 years). The (usually legislated) higher densities, coupled with investment in mass transit will allow for actual functioning cities. While the rise and predicted rise of Chinese car ownership has received media attention, Chinese focus on building effective, comprehensive mass transit has all been ignored by our media.

    Whatever power American urban planners once possessed has been gelded. The developers are the ones with the money, and in ‘market-democracy’, urban planning policies often comport with the developers’ best interests. Suburban centric development over here (I’m speaking from an American perspective) is dictated by the maximum return on investment for the developer community. This usually entails low density tract housing that is completely dependent on the automobile. The initial cost of housing is cheaper to the residents, provides windfall tax revenues for the newly developed municipalities, and allows for huge profits for the developers, landowners, and their political cronies.

    but the aggregate costs of low density suburbia are the highest of any type of development. The costs of building and maintaining the electricity, water, sewer, roads, etc. are generally deferred via bonds, externalized to other taxpayers, and otherwise hidden. When low density suburban development reaches a certain age and needs large scale infrastructure replacement, THEN the costs add up. This is apparent in many older rust belt cities, which were the first American cities to indulge in wholly car-dependent, low density suburbia. In addition to hollowed out industries and stagnant or declining populations, the existing citizenry has much higher per capita costs of maintaining city services.

    Carmakers are incidental beneficiaries of our idiot (in terms of finance and urban planning) development patterns. Unfortunately we also conflate car ownership and car dependency with personal freedom. Is it really freedom if you’re forced to spend big money on the car and its gasoline and upkeep and stew in traffic, yet have no viable alternative? Freedom to enrich developers, oil companies, and car companies via inherently inefficient development patterns and a captive market? Mind you, i love cars. But widespread car dependency does have its costs and impact, yet these facts have been mostly ignored.

    Btw, that picture was taken in Houston. It showed contraflow lane reversal for residents fleeing hurricane Rita.

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