China’s 2010 Auto Sales Could Top 18 Million
By Chris Haak
Fresh from snatching the title of the “world’s largest new-vehicle market” from the US last year, China’s new-vehicle sales could top 18 million vehicles by the end of 2010, which would be an all-time record for a single country. Who held the previous record? The US, of course, before the market started sputtering.
According to Automotive News [sub], part of what’s leading to the sales growth in China is a government tax incentive that cuts the purchase tax on vehicles with engines displacing 1.6 liters or less from 10 percent to 5 percent starting in January 2009. That tax cut helped spur China’s explosive auto-sales growth, but early in 2010, the central government raised the tax to 7.5 percent. The expectation is that the purchase tax will be restored to the original 10 percent level after December 31, though that has not been confirmed.
China’s auto sales grew at breakneck rates during 2009 and 2010 – rising 50 percent in 2009 and another 30 percent in 2010 so far. But JD Power expects that the Chinese government will not allow sales to grow at those rates again, for fear of overheating the economy, plus the damage that adding all of those vehicles does to the environment and to infrastructure. With the restored higher tax rate and a watchful government, a 10-15 percent increase during 2011 might be the most likely outcome.
Incidentally, per TTAC, US sales for 2010 are so far trending toward a final tally of about 11.5 million, with the SAAR (seasonally-adjusted annual rate) trending in the 12 million range for the past few months (in other words, US vehicle sales are accelerating later in the year as the economy shows signs of improving). But that’s still a long way from China’s 2010 number, and even at 10 percent growth over the next half-decade, China will be WAY past the US’s rate even in a complete auto market recovery scenario here in the land of hot dogs and apple pie.
Just think about it: a 10 percent gain in China in 2011 on top of this year’s 18 million pace would be 19.8 million sales. Add another 10 percent in 2012, and you have 21.8 million. Another 10 percent in 2013 equals 24 million, and 10 percent on top of that in 2014 is 26.4 million. Continuing this projection through 2015 would be 29 million new vehicle sales in China, and that’s only assuming 10 percent growth.
There are rumbles that China’s new-vehicle market – or even its entire economy – is a bubble waiting to be popped. But considering the extremely low vehicle density there of 63 vehicles per 1,000 people (in the US, that number is 800 vehicles per 1,000 people), and it seems that China still has a ton of growth left in the tank for its 1.3 billion (or more) people and the country’s new-vehicle market.
China’s continued growth – and the size of GM’s slice of the overall Chinese-market pie – could well explain a large portion of why GM’s IPO last week exceeded expectations. After all, against the backdrop of all of that company’s problems in the US over the past few decades, one of the brightest things it could have done was build a dominant presence in China, and by nearly all measures, GM has done so. In spite of hundreds of competitors of varying sizes and capabilities battling one another in China, GM has managed to stake out a dominant position in the market, and the one-upon-a-time world’s largest automaker stands to enjoy success at the very least from the rising tide of a rapidly-growing market, and its position within that market should bode well for the company’s success going forward as well.
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