China now world's largest car market

Published: 2009/12/12

SHANGHAI: China has overtaken the US as the world's biggest car market, the first time any other country has bought more vehicles than the nation that produced Henry Ford, the Cadillac and the minivan.

Now that the Chinese buy more cars and trucks than Americans, the shift could produce ripples for the environment, gas prices and even the kinds of cars automakers design.

More than 12.7 million cars and trucks will be sold in China this year, up 44 per cent from the previous year and surpassing the 10.3 million forecast in the US, according to J.D. Power and Associates.

China has long been expected to overtake the US since its population of 1.3 billion is more than quadruple that of the US. But the increase in sales happened much faster than anyone expected because of China's tax cuts, its stimulus programme and a depressed US market.



Two years ago, J.D. Power predicted China would pass the US in 2025. Earlier this year, it forecast 2009 sales of just 9 million vehicles for China.

After a sharp slowdown in auto sales late last year, the Chinese government cut taxes on small cars and spent US$730 million (US$1 = RM3.40) on subsidies to encourage sales of SUVs, pickups and minivans. A big stimulus programme also boosted truck sales by pumping money into construction.

Auto sales were expected to rise with China's stimulus, but they have far exceeded expectations, said Jeff Schuster, J.D. Power's executive director of automotive forecasting.

Most experts think the top-sales title will shift back and forth between China and the US for the next several years, with China ultimately prevailing.

"The government has sent a very clear message that they will not let the auto industry weaken, especially in 2010," say Jia Xinguang, chief analyst at China National Automotive Industry Consulting & Developing Corp.

Meanwhile, US sales hit a 26-year low in early 2009 and remain well below the 17 million average from earlier this decade.

China's growing auto market is sure to affect the industry worldwide. Some key factors are:

* China's car pollution: It's gotten worse. China's fleet is newer, and big cities have imposed emissions standards that exceed those in the US, but lax enforcement of standards is a major problem. Vehicles may meet standards at first but then degrade over time.

* China's car pollution: It's gotten worse. China's fleet is newer, and big cities have imposed emissions standards that exceed those in the US, but lax enforcement of standards is a major problem. Vehicles may meet standards at first but then degrade over time.

* Fuel demand: Global demand for oil is rising, fueled by China and India. Most energy experts agree that demand for crude has peaked in the US.

* Fuel demand: Global demand for oil is rising, fueled by China and India. Most energy experts agree that demand for crude has peaked in the US.

* Vehicle design: The Chinese will have more influence over vehicle design as they buy more cars. GM had its Chinese team design the 2010 Buick LaCrosse because the brand sells better in China than in the US. Buick is considered a luxury car in China. - AP

* Vehicle design: The Chinese will have more influence over vehicle design as they buy more cars. GM had its Chinese team design the 2010 Buick LaCrosse because the brand sells better in China than in the US. Buick is considered a luxury car in China. - AP