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How Long Will Car Production and Sales Volume Sustain in China

Source: Author£ºadmin Hits£º9362 Time£º2009/7/6 10:09:28

Chinese automobile market witnessed again the following magic realism features in the first quarter of this year: 2.5676 million and 2.6788 million cars were produced and sold respectively (up 1.91% and 3.88%), among which 1.875 million and 1.9957 million passenger cars were produced and sold respectively (up 4.45% and 7.81%), finishing the decreasing trend of sales volume in the fourth quarter last year and cushioning the impact of global financial crisis on Chinese automobile industry.

In the excellent situation, the tone has changed in the industry with pessimism last year shifting to cautious optimism, especially production and sales volume in China has surpassed those in the United States for three consecutive months, making China become the largest market and even more Chinese people’s expectation on automobile industry to the unprecedented level. Some enterprises have suggested that industry-wide growth rate this year will continue to exceed 10%.

The expanding sales volume vividly proves increasing demand. Although China has become global No.1 automobile market for three consecutive months, more than 60% of car buyers buy cars for the first time and each one thousand persons only own 30 cars, which constitutes the inner driving force for the growth of car market compared with more than 700 cars for each one thousand in the United States.

Actually, those with the view that financial crisis has no impact on Chinese car market undervalue the impact of policies on China’s consumption. The plan for reinvigorating automobile industry and adjustment of new consumption tax produces instant results on car consumption structure: the sales volume of passenger cars with displacement below 1.6L reached 1411.4 thousand in the first quarter, up 21.93%, being 14% higher than average growth rate of passenger car sector; and market share hit 70.72%, up 8.19% compared with the corresponding period last year.

All the enterprises enjoying rapid growth in the first quarter are those putting bets on policy factors such as Beijing Hyundai and BYD, while those reeled from high volume of cars or suffered overstock at the end of last year saw unconspicuous growth. In addition, the release of purchase power of consumers in the first quarter this year who maintained money as a result of the impact of macro economy also contributed to growth.

Fiscal stimulation can bring short-term growth to China, however, the question on whether this momentum can sustain for the whole year even more longer time is raised, currently, fundamental turnaround has not yet been seen on the demand side.

Firstly, only one year is available for implementing the plan for reinvigorating automobile industry since November last year, thus manufacturers only make short-term product adjustments according to policies, the uncertainty adds difficulties to enterprises for decision making in market. Secondly, the proportion of cars with low and medium displacement and minibuses in cars sales in the first quarter was excessively high, profit from singe car of these models is relatively low, making decreasing profit in spite of increasing sales volume. Finally, export was hit hard; 61 thousand cars were exported in the first quarter, down 62.06% compared with the same period last year; all top five exporting enterprises saw substantial decrease in export which is considered as the most important indicator for measuring China’s shift from big nation to powerful nation in terms of car production and sales.

Now there are the following catchwords in the automotive industry: nobody can make prediction about Chinese automotive industry. But at least we should be acutely aware that it is almost impossible for one systemically gigantic sector with high linkage to be immure to the trouble times, facing with current momentum, each enterprise should be more calm rather than excited.