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

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.