Competition for China's auto market is heating up

Updated: 2008-04-22 15:45

At 23, Shi Lingxi bought his first car last week.

He considered a Ford Focus and other models during months of shopping. But on Wednesday, Shi negotiated a 35,000-yuan discount that knocked about $5,000 off the price of a Nissan Blubird. He put the $20,000 sedan on a credit card his parents will help pay.

He doesn't plan to drive it to work much -- it's too hard to find a parking spot -- but he looks forward to the freedom his car represents: the ability to get out of the Chinese capital for weekend outings.

"I bought the car to expand the radius of my living," said Shi, a human resources professional in Beijing.

There are millions like him in China. Personal car ownership is driving the million-vehicle-per-year growth in China's auto industry and, for now, seven of eight are bought by first-time car buyers.

Economic growth and the corresponding boom in the auto industry in this nation of 1.3 billion people -- and in the private passenger car market in particular -- has attracted more than 100 global and domestic vehicle manufacturers to compete on the Chinese stage.

Nearly all of them -- including General Motors Corp, Ford Motor Co and Chrysler LLC -- plan to display their offerings, unveil new concepts and vie for consumers at Auto China 2008, between April 20 and 28.

"This is now the largest auto show in the world, by number of automakers," said Nick Reilly, president of GM Asia Pacific. "Where just two years ago Beijing was a relatively small, cramped show, now, you're getting first-time showings. Unless it's a major international show, you just don't waste those. That's really a sign it's become a very important show."

Growing and growing

China's growth is in stark contrast with what is happening in North America, which in 2007 experienced its worst sales in 15 years and where US automakers reported historic losses. In the last 10 years, China's auto market has grown 500 percent.

"The dynamic we're going to experience is different than anything we've experienced in any of our lifetimes," said Jim Raymond, executive director of vehicle sales, service and marketing for GM's Asia-Pacific region, which includes China.

And experts at the Automotive News China Conference in Beijing late last week forecast continuing annual increases of about 10 percent in the China market for decades to come.

"There has been a big shift in the world economy, powered by the populations and changed political direction in China, India and Russia and other locations geographically close to these three," Reilly of GM said. "This is a shift in economic power that has decades or more to run."

It's estimated that there are between 43 million and 47 million vehicles on the road in China -- about as many as there were on US roads in 1947.

The University of Michigan Transportation Research Institute reports that only about 33 of every 1,000 Chinese residents owns an automobile.

IBM Business Consulting puts that the number at 44 vehicles per 1,000, Frank O'Brien, executive vice president of Magna International Inc's Asia Pacific Region said.

That compares with a world average of about 120 automobiles for every 1,000, O'Brien said, and ownership rates above 800 for every 1,000 people in America.

He expects vehicle ownership to grow to 100 per every 1,000 people by 2015. Estimates for 2030 range from 178 to 269 per 1,000 people.

"More and more, people will join the automobile market as they migrate from two wheels," GM's Reilly said.

(For more biz stories, please visit Industry Updates)

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