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China's auto market still hot

larran larran
New User | Posts: 2 | Joined: 05/12
Posted: 05/02/12
08:52 PM

The consensus from Detroit to Wolfsburg to Tokyo: China's still hot, but its new normal will be annual market growth of 5% to 10% rather than the double digits of the past. That's just fine by most executives, who prefer moderate but steady growth to peaks and valleys."The growth was too much, too quickly," said Fiat Chrysler CEO

Sergio Marchionne.A slowing economy, high gasoline prices and the expiration of government incentives took a bite.But things are moving fast enough. For perspective, go back to the Automotive News World Congress in Detroit in January 2011. Dazong Wang, a former General Motors executive and then the president of Beijing Automotive, caused a roomful of attendees to gasp when he predicted that sales would hit 40 million units, including commercial and 30 million passenger vehicles, by 2020.

Sales had been about 18 million in 2010, and growth has slowed dramatically since. In 2011, sales rose only 2.5%, to 18.5 million units. And in the first quarter, total sales slid 3.4%, to 4.79 million units, while light-vehicle sales dropped 1%.So is last year's giddy forecast by Mr. Wang ridiculed as irrational exuberance? No, it's just about the consensus: 40 million vehicles in eight years."It's the common view," said Daimler CEO Dieter Zetsche. "Everybody might be wrong, but assuming an average GDP growth of 8%, you almost can calculate how many people will come from an ... agricultural background to an entry-industrial background, and how many people will go from this position to middle class and how many people will rise to a more affluent level of purchasing power. And with that premise, you can almost make a calculation of how much car sales will increase. And it is reasonable."

The consequences are huge for the world's automakers. If they just cling to existing market shares, their volumes will double. The center of their universe will shift to China.For Mr. Zetsche's Mercedes-Benz, for example, the U.S. and German markets are bigger than China's, though not by much. What happens when passenger-vehicle market grows from 14 million or 15 million units to that 30 million?"China will be our No. 1," said Joachim Schmidt, Mercedes' head of global sales. "In the U.S., sales are 14 million this year and 15 million next year, but not 30 million."

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