The phenomenal growth of the Chinese car market

China’s car market: spectacular growth and phenomenal potential

The Chinese automotive industry is a riveting, fast-moving drama and the stage on which the players are currently competing for the attention of a global audience is Auto China, the 11th Beijing Motor Show, 23rd April to 2nd May 2010. Almost one thousand cars are on display, 89 of which are making their world debut. Thus, Beijing takes its place among the world’s elite Auto Shows, currently headed by Frankfurt, Paris and Chicago.

In the mid-1990s China had virtually no private cars on its roads. By 2009, China had overtaken the United States to become the largest car market in the world. That year, car and light commercial sales were almost 13 million units compared with US sales of 10.4 million units, the lowest level in 27 years.

The speed at which the market is growing is breath-taking. 2009’s record volume was 48% up on the previous year. Boosted by economic growth of 11.9%, in the first quarter of 2010 passenger car sales accelerated to an astonishing 3.52 million units,   76.3% ahead of the same period in 2009. Growth is likely to cool, however, to around 20% for the full year as China winds down its tax incentives and takes further measures to curb inflationary pressures.

Chinese car sales have grown so fast that the country is already the biggest market for Volkswagen, Europe’s largest car maker. General Motors could easily sell more cars and trucks in 2010 than it sells in its own home market. GM sold 2.1 million cars and trucks in the United States in 2009 and says total China sales of all its brands, including those with local partners, should pass 2 million this year.

With a record 34,200 car sales in the first quarter of 2010, it is highly likely that China will become BMW’s second largest market, overtaking the UK. Mercedes-Benz first-quarter 2010 sales in China more than doubled from a year earlier to over 23,600 cars.

GM has said it expects the number of Chinese families that can afford a car to mushroom to 75 million in 2015 from 10 million a decade earlier. ‘For every 1,000 people in China, 30 own a car. In the US, the figure is 700 or 800. Selling cars to the bicycling masses of China is a prospect to make any carmaker salivate,’ the Financial Times reports.

Carlos Ghosn, CEO of the Renault-Nissan Alliance, was correct when he said that the Chinese car market could reach 20 million units in the next few years. The only question is how quickly?