By on October 10, 2010

Hidden deep in the bowels of a rather boring story on how the China’s Traffic Control Bureau wants to implement  “nine measures to better manage autos and supervise drivers” (story brought to you by the China Securities Journal via Gasgoo) is an interesting nugget of information: “The number of motor vehicles owned by Chinese citizens is of 199 million according to this year’s figure, 85 million of which are cars.”

Now THAT is interesting. The number previously published was just motorvehicles. Everybody knew that that included gobzillions of two- and threewheelers. The true number of cars on China’s roads and hence the crucial cars per thousand number was anybody’s guess.

If we accept (don’t, it’s wrong), the China population number of  1,338,612,968 as published by the CIA factbook, then we have 63 cars per thousand. Using the widely assumed population number of 1.5b for China doesn’t change the number much: 56 cars per thousand. What is interesting is the order of magnitude, and the possibilities that are in the Chinese market.

It is a widely accepted benchmark in the industry that market saturation begins at around 500 cars per thousand. Most developed countries hover in that neighborhood. Germany has 600 cars per thousand. Countries where most is more or less in walking distance, such as Luxembourg (697) or Puerto Rico (617) have more cars per thousand than Australia (619) or Canada (563). There goes the theory that the wide open spaces necessitate the car density of the world leader, the U.S.A. (approx 800). Even formerly poor countries like Slovenia or Poland are in the 500 territory. Be it as it may: If you want to be somebody in the world, you  better have 500 cars per thousand or thereabouts.

Now here is a country that just a few weeks ago passed Japan to become the world’s second largest economy by GDP, and it has only 60 cars per thousand? This is the reason why car manufacturer all over the world are falling over each other to get into China.

60 cars per thousand in a country with a 1.5b population says one thing: GROWTH. Bringing China to the benchmark car density level of around 500 per thousand would necessitate the sale of around 700m cars, not assuming any scrappage. Even if China would buy 50m cars per year, a number that horrifies some, but that is assumed as entirely possible in industry circles, getting China into the 500 car per thousand area would take more than 10 years. This market is huge, and it will stay huge for a long time. India will be next.

PS: Just recently, the Washington Post said, citing a professor, that there are only 35 cars per thousand in China, vs. 850 in the U.S. In the grand scheme of things, it doesn’t matter whether the WaPo is wrong and China’s Traffic Control Bureau is right. The fact remains that both numbers will change.

PPS: The trucks that caused the epic traffic jam in the video transport coal. You know, the stuff that is turned into electricity to power EVs. Be careful of what you wish for.

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7 Comments on “Here Is Why The World’s Largest Car Market Will Get Much, Much Larger...”

  • avatar

    That’s the illegal coal. If it were electricity-producing coal, it could’ve been transported by rail.

  • avatar
    Cammy Corrigan

    Please could you change that video? Every time I switch pages on TTAC, she starts yakking away….

  • avatar

    Countries where most is more or less in walking distance, such as Luxembourg (697) or Puerto Rico (617) have more cars per thousand than Australia (619) or Canada (563). There goes the theory that the wide open spaces necessitate the car density of the world leader, the U.S.A. (approx 800).
    It should be pointed out that Luxembourg has the highest GDP per capita in the world; the number of cars per capita is likely that high simply because a large part of the citizenry can afford cars as a luxury despite the well-developed public transportation options available. Puerto Rico, being both a bastion of Caribbean tourism and a high-income country as defined by the World Bank, most likely has an inflated number of cars per capita as well due to rental car agencies and very wealthy residents owning cars simply because they desire them.

  • avatar

    I concede the market potential is huge, but I don’t think the 500 per thousand should be applied to China, or India. I’ve heard India described as a modern first-world country of 300 million – embedded in a third-world country of 800 million.  I suspect the wealth in China to be concentrated in a large middle class of similar size embedded in a much larger population. You can reach 500 per 1000 for a middle class of 300 million, but for the total population, that would become 100 per 1000. Add a trickle-down used car market to the larger population and 150 per 1000 could be reached.  Still, that’s a huge potential for growth. Only war, political upheaval or oil price spikes (and government response to oil import costs) could put a dent in it.

  • avatar

    If China had 500 cars/1k they would consume all of OPEC’s production and there would be no place to drive — every road would be a parking lot. It’s not just selling cars, but having the infrastructure to support them.


    • 0 avatar

      Exactly. by the time China gets to 25m cars per year, gas prices will be so ridiculous that it will hit something of a cap. I’m not sure how much the government subsidizes gasoline (I’m sure they do though?). China’s middle class is that in name: the middle class by standard of living. In terms of real income, they are still far below western middle classes, so if gas prices are equal across the world (something that’ll come close to reality once they get very high) the middle class of china will have a much harder time affording it than the middle class of the west. Their only hope is to switch to CNG and use all that coal they’re trucking around to make syn gas if they want to be able to fuel their made consupmtion.

  • avatar

    While one cannot argue with the logic that China has a long way to grow, and the means to do it, a contrarian might point out that unanimously high expectations almost never come true.  

    The  logistics of so many cars being added to China’s already-crowded cities are one hurdle.  Add to this the rising energy costs it would bring, and the effect this would have on China’s export economy, and it almost seems a foregone conclusion that this will be a self-moderating trend.

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