China's auto market sees long-term growth ahead

• Source: CE.cn
• [09:10 December 28 2010]
• Comments

According to the latest data from China Association of Automobile Manufacturers (CAAM), from January to October of 2010, China's automobile output and sales are 14.6238 million and 14.6770 million respectively, exceeding the whole numbers of the last year; In the meanwhile, the sales of passenger cars in China's automobile market in the first 10 months of 2010 has reached 11.1006 million, 769,300 more than the whole number of last year.

Till now, the success of China's auto market in 2010 is beyond doubt. The industry has began to look at China's car market in 2011 - Will it keep rapid growth that has been in the past two years, or go back to the rational growth after related preference policies' fading out? We will pay continual attention to it.

The American authoritative market consulting organization J.D. Power stated recently that the whole sales of autos in China's auto market in 2010 would be 18 million with a growth rate of 30 percent.

In addition, J.D. Power believes that in 2010 and the following few years, the growth rate of China's auto market will slow down to 10 percent. This is the most conservative judgment of the automobile industry on the trend of China's auto market in 2010.

J.D. Power thinks that the primary factor leading to the slowing down of the growth of China's auto market is the retreat of consumption promotion policies. In January 2009, Chinese Central Government carried out a policy to halve the purchase tax of car types at 1.6L and lower, plus two promotion measures of Automobiles Going to the Countryside and Auto Replacement that drive the car consumption, the development confidence of China's auto market in 2009 was greatly enhanced. The growth rate of auto sales in the whole year reached 47 percent year on year, and China became the biggest auto consumer.

In 2010, though the purchase tax was regulated from 50 percent reduction up to 25 percent discount, the consumption power continued being released and the growth rate didn't slow down obviously. On the condition of continuing steady growth, relevant car promotion policies will fade out gradually in 2011, thus the growth of China's car market will slow down in 2010.

Will the retreat of relevant auto sales promotion policies influence China's auto market so decisively? Jia Xinguang, the experienced auto industrial analyst, believed that it would be a common opinion that many new difficulties would appear in the 2011 car market, including the retreat of a series of periodical consumption promotion strategies.

At the same time, he reckoned that though the leverage of policies on encouraging low emission vehicle consumption is considerable, any stimulative measures have their time limitation, and with the adjustment of other market aspects, the stimulative effect will weaken gradually. The current market acceleration of high emission vehicles proves that the whole auto market doesn't rely on the policy stimulation completely.

As to the future development of China's auto market, Chang Xiaocun, Director of the Department of Market System Development of the Ministry of Commerce, pointed out at the annual conference of China Automobile Dealers Association that it is expectable China's auto market will keep a rapid growth trend in the future 5 to 10 years with the growth rate that will no longer be as high as 40 percent or 50 percent as it has been in this year or yesteryear.

In the future 10 years, the auto market will keep a steady growth at 10 percent per year, and the output and sales of China's auto industry will top 30 million, near 40 million as it is predicted.

From this point of view, the simple pursuit of high growth of China's auto market will have no essential meaning on the healthy development of China's auto industry. In the long run, China is at the initial stage of auto popularization, which is far from the saturation stage, thus the auto market will keep steady growth in a relatively long run.

And the consecutive growth has enhanced the base number, making the future growth harder. However, even the market grows at 10 percent in 2011, there will be a net growth of 1.7 to 1.8 million cars, which is still a considerable number.