Cars
World auto crown lacks full luster
By Tim Dunne (China Daily)
Updated: 2010-03-15 13:13
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2009 milestone in perspectiveBy now, just about everyone has heard that China eclipsed the United States as the largest vehicle market in the world in 2009.
China's light-vehicle sales came in at 12.9 million units while the US sales registered 10.4 million units.
The milestone is notable, but it needs to be put into perspective. Scratching beneath the surface of China's automotive market, we get a clearer picture of where the market stands, and where there is room for growth and improvement.
Of the 12.9 million light vehicles sold in China in 2009, about 25 percent were light commercial vehicles (LCVs), defined by JD Power and Associates as trucks and buses that weigh less than 6 tons.
In China, new LCVs typically retail for between $5,000 and $12,000 - a relatively humble sum compared to retail prices in the US. And among the 4.2 million LCVs sold in China last year, nearly 60 percent fell into either the micro truck or micro van segments, where vehicles typically retail for around $5,000 to $6,000.
US: Few in $10,000 range
By comparison, only a handful of new vehicles in the US retail for less than $10,000, and none at all dip into the $5,000 range.
A quick calculation suggests that the combined sales of these under-$10,000 models in the US accounted for less than 1 percent of total US light vehicle sales in 2009.
So, while it's technically true that China outsold the US in 2009, we find that the comparison might not be appropriate. On the China side, roughly 20 to 25 percent of the market is priced below $10,000 - and closer to $5,000 - while in the US this figure is about 1 percent.
Last year's sales of 8.7 million passenger vehicles in China, including SUVs, and minivans, was actually slightly behind the US, where 9 million passenger vehicles sold.
That's not a significant difference. But what is significant is the difference in the average transaction prices of these vehicles.
From that perspective, the US new-vehicle market is a far larger and potentially more valuable than the automotive market in China.
China's maturation as a vehicle market is still in its early stages. As a result, the number of vehicles on the road is still small compared to the US.
JD Power data shows that the total number of light vehicles on the road in China at the end of 2009 was 60 million. This compares to around 250 million in the US.
All of these vehicles create business opportunities in different ancillary automotive businesses ranging from replacement tires and spare parts to oil changes.
