China Applying Brakes To Auto Market

Bertel Schmitt
by Bertel Schmitt
china applying brakes to auto market

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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  • Porschespeed Porschespeed on Apr 16, 2010

    "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.

    • See 1 previous
    • Porschespeed Porschespeed on Apr 16, 2010

      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.

  • David C. Holzman David C. Holzman on Apr 16, 2010

    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.

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    • Bertel Schmitt Bertel Schmitt on Apr 16, 2010

      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.

  • Ttacgreg Ttacgreg on Apr 16, 2010

    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.

  • Atlas_snored Atlas_snored on Apr 16, 2010

    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.