China's rise in the global auto market

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(China Daily/Agencies)
Updated: 2009-07-20 13:53

New Ford vehicles are parked at the Changan Ford Mazda Plant in Nanjing. China overtook the US to become the world's top car market in the first half of this year. [Bloomberg News]

In the century since Henry Ford rolled out the Model T - the world's first affordable, mass-produced car - in 1908, America has been the world's No 1 auto market.

Nothing lasts forever.

Some day in the not-too-distant future the rise of China's middle class and its growing hunger for cars will push aside the US auto market and grab that top spot.

That prediction makes sense given China's 1.3 billion-plus population - a fifth of the world's total - and robust economy, which is not growing by double-digits anymore but is still enviably healthy.

"The Chinese auto market is going to explode exponentially over the next five to 10 years," said Mirko Mikelic, an analyst at Fifth Third Bank.

"They have an untapped consumer base that is constantly growing, so I don't think it would surprise most people that China is expected to surpass the United States in the next 10 years," Mikelic said.

But China's rise to the top in numerical terms has some broader implications for the global automotive sector.

As ever more people in the country seek to buy their first cars, the expectation is that small, low-cost and rugged cars will dominate the country.

Rugged cars will be needed because China's roads are still a work in progress, not unlike those early American roads of Ford's Model T days.

US automakers have not focused on building small cars over the years, which means more vehicles will be developed in Europe and Asia, continuing a long-term shift away from Detroit as a research and development center.

America's automakers, however, should benefit from their strong image in developing markets like China.

And more than ever before, China's sales will mean car makers must reach out to far-flung world markets.

"China's rise emphasizes the fact that the auto companies that are going to do well are the ones that are truly global," said IHS Global Insight analyst Aaron Bragman.

"If you don't have a global presence, you're going to miss out," Bragman said.

One up, one down

Unlike most other auto markets, China's has continued to post impressive growth this year.

On July 9, the China Association of Automobile Manufacturers said the country's passenger car sales jumped 47.7 percent in June to 872,900.

Those numbers were lifted in part by government stimulus measures, including a halving of the sales tax on small cars and also subsidies for buyers in rural areas.

The association said total vehicle sales for 2009 would exceed 11 million units.

That growth exceeds the United States, where auto sales fell 27.7 percent in June to 859,847 vehicles. Analysts now forecast 2009 sales of around 10 million units.

Although at face value the numbers suggest China has already surpassed America as the world's No 1 auto market, this is not an apples-to-apples comparison. China's numbers include heavy trucks, which are not included in the US data.

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