Indeed, 2010 was an interesting year in global auto sales, as GM – General Motors had sold more cars in the Chinese Market than they did in the USA for the first time. This year may not repeat, but the numbers might still be closely related. Having the Chinese growing middle class buy American products the way we in the US buy Chinese products is a great move forward and a rather positive development in free-trade.
There was an interesting piece recently in the China Economic Review titled; “Auto sales in China decline in April,” which was posted on May 11, 2011 which duly noted that “Auto sales in China declined for the first time in two years, falling 0.25% in April to 1.55 million units. The decline is attributed to the disaster in Japan’s effect on the supply chain, the cancellation of government subsidies for car purchases, and rising oil prices.” And the article goes on to state; the only remaining incentive for car purchases – a RMB 3,000 subsidy for certain small-engine vehicles – is set to end in June. More declines are likely if oil prices remain high.
Indeed, I believe that the Chinese Association of Auto Manufacturers had hoped for much stronger results but it now looks as if we will see a 12-16% negative decrease from those previously projected numbers as per the Financial Times and WSJ. Now only have foreign auto sales decreased in China somewhat significantly, as of late, but also domestically produced car sales as well nearly 2% in fact.
Part of this is probably due to increased road taxes and the removal of a 3,000 Yuan incentive program, which was in fact being offered for low CO2 producing engines or small motors. The auto sales in China do have some headwinds if you consider the issues with inflation, challenges with car parts after the Japanese earthquake, the civil unrest, and commands for higher pay, and China’s inadvertent regulatory maneuvers to put its companies at the forefront.
There are also other issues such as the pollution in the major cities and the severe traffic constraints. Too many cars have been sold, causing too much pollution on top of the coal-fired plants putting all the soot in the air. The traffic jams are absolutely out of control and hurting productivity in all China’s industries, and it’s become a nightmare. If they continue to allow more car sales, the problem will become exacerbated, even if the oil prices and the price of gasoline continue to rise without further Chinese subsidies.
Does that mean that US auto sales in China have already gone beyond their heyday? We don’t know that yet, and time will tell, but the most recent data does not bode well for confidence of US automakers selling into that market. A couple of European car manufacturers have actually left China now. Indeed I hope you will please consider these ongoing changes in the Chinese market place and think on it.
