Car sales rev up to double speed in China

The Financial Times, December 15, 2013

After an uncharacteristic deceleration in 2012, the world’s largest car market is again growing at a double-digit clip, writes Tom Mitchell in Beijing.

LMC Automotive, a consultancy, estimates that sales of passenger vehicles in China from January to September increased 15 per cent to almost 12m units. That compares with expected growth of less than 8 per cent in the US for 2013, and projected year-on-year declines in Brazil, Russia, India, Germany and Japan.

China’s four richest urban centres seem to be overwhelmed with traffic congestion and related pollution issues.

But Beijing, Shanghai, Guangzhou and Shenzhen are just at the point where car ownership traditionally begins to take off – when per capita GDP reaches $10,000. According to Synergistics, another automotive consultancy, that figure in China’s “big four” regional car markets now stands at more than $12,700.

Moreover, manufacturers are turning their attention to the smaller cities where more than 80 per cent of the country’s 1.3bn people live and per capita gross domestic product is about $4,000.

“Congestion and pollution issues might have a negative effect [on growth in China’s largest cities], but [smaller cities] still have a lot of potential,” says Ray Bierzynski, executive vice-president of General Motor’s joint venture with SAIC Motor and Wuling Auto in Guangxi province. “Our expansion has got to be in those areas.”

In volume terms, GM is the second most successful multinational car company operating in China. Its joint ventures with SAIC, First Auto Works and Wuling sold 1.1m passenger vehicles over the first three quarters of this year, compared with Volkswagen’s 1.9m.

Analysts attribute GM’s and VW’s success in China to aggressive localisation of production, research and development – a tactic that automakers at the luxury end of the spectrum are also adopting.

Daimler formally opened an engine plant in Beijing in November – its first outside Germany – that will eventually export components to Europe.

Yet China has yet to emerge as a significant automotive exporter as Japan and Korea did before it, especially to the US and Europe. Over the first eight months of this year, China’s vehicle exports fell three per cent over the same period in 2012 to just 500,000 units.

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