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DATE News (chronologically)
01/08/10
automotive
China surpasses USA as world's largest auto market
On a day when General Motors announces it is closing perhaps its best quality European car line (Saab), market statistics were released that indicates China has overtaken the United States as the largest auto market in 2009, with a continuing growth trend.

Though heavily criticized by American taxpayers and conservatives, the Chinese government has instituted sweeping economic stimulus from Beijing, resulting in passenger car sales soaring to 10.3 million and total vehicle sales approaching 13.6 million, the China Passenger Car Association said. That represents single-year growth of nearly 45 percent.

"This is even better than anyone expected," the group's general secretary, Rao Da, said at a news conference in Shanghai.

Here at home, the U.S. automotive market has declined 21 percent for the same 2008-2009 period, with 10.4 million units sold, as a consumer confidence continues to keep buyers cautious about large purchases. This is the first time in recorded history that any other country's population has purchased more vehicles than American consumers.

The Chinese group's data was consistent with forecasts by J.D. Power and Associates of 12.7 million sales of cars and light trucks and 900,000 bigger vehicles in 2009 for a total of 13.6 million. The company adjusted their projections however, when Beijing announced their stimulus package.

"It's very, very strong growth, far beyond the expectations we had in the early part of 2009," said John Bonnell, a J.D. Power analyst.

China's status as the top auto market is yet another sign of its rapid rise as a global economic power. After a solid 20 years of economic growth, it is believed to have passed Germany last year as the largest automotive exporter, and is expected to overtake Japan soon as the second-largest automotive economy after the United States.

The world's auto makers are looking to China to help drive sales as demand sputtered in America and tightly related foreign markets such as Canada, while U.S. automakers did their best to simply stay afloat. Volkswagen sees China is its largest market.

Even the American automakers are getting on the bandwagon to the Chinese market. GM has see a 67 percent increase in their Chinese sales numbers, while Ford's sales are up 44 percent.

China, with 1.3 billion people and a growing urban elite, has unanimously been expected to emerge as the top auto market, but not until around 2020. That date accelerated however, as the U.S.  market faltered, while China continued to grow with the help of a 4 trillion Yuan ($586 billion) government stimulus.

Economic growth accelerated to 8.9 percent over a year earlier in the third quarter and the government says it should be 8.3 percent for the full year.

"The temptation is to say that with 45 percent growth in 2009 there must be a payback in 2010," Bonnell said. "But all indications are the government wants to continue to stimulate things, and our expectation is they will succeed in doing that."

It is largely perceived that the Chinese auto market is mainly driven by the urban markets. However, with those markets reaching their capacity, the smaller markets and even villages as the economy has morphed from local subsistence farming, into a widespread industrial society that requires more commuting and travel.

"People there are getting richer and can afford cars. Younger people can work for two or three years and with the help of their parents can buy a car," Rao said. "Being able to afford a car in China is not so difficult any more. People with an average salary can afford to buy a car."

China's small but ambitious automakers are starting to expand abroad and some have set up factories in Ukraine, Iran and other developing markets. Some want to break into U.S. and Western European markets but have yet to satisfy safety and emissions standards, as well as quality demands that US car buyers take for granted.

"We don't see that they are ready, that they are achieving these levels of quality or safety," said Bonnell. "There is no indication that next step is right on the horizon."

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