The 50 Million Car Market: China's Boom Will Last More Than 20 Years, Experts Predict
If you are hoping that the Chinese bubble will burst in no time, putting China back on bicycles, then this story is not for you. If you are worried about little people in Asia using up all the precious hydrocarbons we use for our bigger cars, then we must warn you that reading further could be hazardous to your circulatory system. You have been warned.
The golden period of China’s auto industry will likely last 20 more years. Yearly demand for passenger vehicles in China will reach over 35.2 million units in 2030. These are the conclusions of a report co-issued by the State Council, the Society of Automotive Engineers and Volkswagen China. None of them are known for their irrational exuberance.
“The number of passenger vehicles in use in China may rise to 200 million in 2020, which means that each Chinese person may own one-seventh of a vehicle on average by then, a figure barely reaching the current world average level,” said Zhang Xiaoyu, executive vice-president of the China Machinery Industry Federation. “There is still a long way to go to achieve the moderate level of developed countries.”
From what I privately hear is that they are all lowballing. Long before 2030, the annual demand in China will be approximately 50 million cars per year. Where does this number come from? From a golden rule in emerging markets that never fails: Use the current demand for motorcycles, tricycles etc. Once people have the money, they will buy cars instead.
Jack Perkowski, China visionary and author of the book Managing the Dragon, came to the same conclusion many months ago: “China’s auto industry will continue to show rapid rates of growth for many years because China’s total demand for transportation is already much bigger than most people think. I would argue that China’s transportation industry is actually 50 million vehicles per year.”
You think the poor exploited Chinese peasants will never ever be able to afford a car? In 1980, more than 50 percent of China lived below the poverty line. In 2000, it was less than 10 percent. Now, the percentage of Chinese people living in poverty is estimated at 2.8. Source? The CIA Factbook. In the U.S.A.? 12 percent. Same source.
200m cars on the road by 2020 would be 75 cars per thousand people. In the US, we have 800 cars per thousand. The G7 average is around 600. Even Poland now has close to 500 cars per thousand. Even at a rate of 50m cars per year, and assuming no scrapping, China would need 15 years to reach the level of Poland. When I look around here, the country definitely looks way more prosperous than Poland.
And just to put it into perspective: Last year, the worldwide output of passenger vehicles in all countries was 47 million.
Anyway, the lowballing report predicts that China’s passenger car sales will reach nearly 15 million units in 2010 and approximately 22.6 million units in 2015. The yearly demand for passenger cars in China is estimated to reach more than 25.8 million units in 2020, more than 29.2 million units in 2025 and more than 35.2 million units in 2030. Again, the estimates are conservative. Due to the byzantine way China defines “passenger cars,” the total count will be much higher. Let’s just say this: If GM China would have to rely on passenger cars alone, more than 1 million Wuling trucks and vans would be missing in their statistics.
Feng Fei, chief editor of the report and director of the Industrial Economy Research Department under the State Council, predicts that “thanks to the mature hybrid power technology, China will likely produce 100,000 hybrid vehicles, 30,000 pure electric vehicles, and 10,000 fuel cell-powered vehicles in 2010.”
According to the report, sales of the alternative energy vehicles will reach 500,000, 150,000, and 15,000, respectively, in 2013, and 1 million, 300,000, and 20,000, respectively, in 2015.
What could hold possibly hold up the development? China is a bit behind on electronics. Most of the designs come from abroad. Fu Yuwu, standing director-general of the Society of Automotive Engineers, exhorted the industry to attach more importance to automotive electronics research and development, says People’s Daily.
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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