Here Is Why The World's Largest Car Market Will Get Much, Much Larger

Bertel Schmitt
by Bertel Schmitt

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.

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.

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  • Twotone Twotone on Oct 10, 2010

    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. Twotone

    • Homeworld1031tx Homeworld1031tx on Oct 14, 2010

      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.

  • Don1967 Don1967 on Oct 11, 2010

    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.

  • Lorenzo Heh. The major powers, military or economic, set up these regulators for the smaller countries - the big guys do what they want, and always have. Are the Chinese that unaware?
  • Lorenzo The original 4-Runner, by its very name, promised something different in the future. What happened?
  • Lorenzo At my age, excitement is dangerous. one thing to note: the older models being displayed are more stylish than their current versions, and the old Subaru Forester looks more utilitarian than the current version. I thought the annual model change was dead.
  • Lorenzo Well, it was never an off-roader, much less a military vehicle, so let the people with too much money play make believe.
  • EBFlex The best gift would have been a huge bonfire of all the fak mustangs in inventory and shutting down the factory that makes them.Heck, nobody would even have to risk life and limb starting the fire, just park em close together and wait for the super environmentally friendly EV fire to commence.
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