Chinese auto market remains a rapid growth in development.
Word came that dealers』 stocks have been increasing and the prices have been declined for promotion since 2010.
Chinese auto market is about to meet its inflection point after it has been through sales spur in 2009. For 8 years, Chinese auto market has maintained a rapid growth, achieving 20% in almost each year. However, the growth was lower than 10% in 2008, since it has been affected by financial crisis. According to experiences from abroad, the rapid growth is not sustainable. So, will Chinese auto market follow this rule? Or whether 2010 will be an inflection point of Chinese auto market?
The number of issued licenses of vehicles hasn’t made a new record high.
In the first quarter of 2010, the number of issued licenses of domestic vehicles was 2,760,000, up26% year on year. Although it still maintained a growth as high as 20%, it's worth noticing that the number of issued licenses didn't make a new record high in the first quarter, lower than that of the forth quarter of 2009. The number of issued licenses seems to prove the upcoming of an inflection point of auto market.
Compared with last year, the growth of vehicles with engines of up to 1.6litres or less achieved only 18%, much lower than 41% of growth of vehicles with engines of above 1.6 liters in the first quarter. Thanks to preferential policies of sale tax deduction, the number of vehicles of engines of up to 1.6 liters or less has been increased by 90% in 2009. However, since the state has made adjustment to the policies due to Jan, 1st, 2010, the declining preferential range has directly affected the sales of this kind of vehicle models.
The number of issued licenses of vehicles of engines of up to 1.6litres and less has been jumped to 970,000 units from previous 600,000 units, consuming at least 200,000units in advance, which should have been sold in the first quarter of 2010. Thus, the number of issued license hasn’t made a new record high as result of the purchasing behavior in advance. Putting state incentives aside, the number of issued licenses in the first quarter of 2010 should remain the same as that of the fourth quarter of 2009. The view of an inflection point is hard to establish from this point.
The halo of developed areas has not faded out.
Since financial crisis, people have endeavored to explore the second and third level of market, which has become an impetus to the growth of domestic auto market.
Since financial crisis broke out, the marketing contribution margin has increased from 44% in 2007 to 51% in the central and western areas in 2010, leading domestic auto market indeed. While the uprising second and third level of market has slowed down since the first quarter of 2010, developed areas have started compensatory growth. In the first quarter, the growth of vehicle sales achieved about 40% in some areas, which has been greatly influenced by the global financial crisis, such as Zhejiang, Jiangsu, Guangdong, and Shanghai, far above the average level in the automobile sector. However, the provinces including Shaanxi, Jiangxi, which has been a fastest growth, suffered a high decline in the auto growth, about 15% in average.
Laying aside the influence of financial crisis, the growth of developed areas actually remains the same as the central and western areas, achieving about 50% or 60%, from the first quarter of 2008 to the same period of 2010. Amongst those areas, there were only three provinces including Guangdong, Shanxi, Tianjin, which have been greatly influenced, with the growth of only 15%. The growth of Shanxi lay in provincial coal management, while Tianjin resulted form the earlier huge boom in sales. Thus, the influence which financial crisis brought about to the developed areas has been neutralized by their intense compensatory growth. Developed areas remain a mainstay in the domestic auto market.
Chinese auto market remains a normal growth.
In terms of developed areas of compensatory growth, the influence which financial crisis brought about to domestic auto market starts eliminating.
Before financial crisis, Chinese auto market remains a growth of about 24% every year. The purchasing confidence was strong until the financial crisis broke out in 2008 with only 6% of growth. However, the huge loss in 2008 and state incentives in 2009 brought about the sales boom in 2009. If the growth of auto market was supposed to remain the normal level of 24% in 2008 and 2009, then the sales of vehicles should have achieved 9,000,000 units in the end of 2009.
Thanks to state incentives, the number of issued licenses has achieved 10,21million units, up 1million units. The growth of domestic auto market should reach 11,2million units, calculated by the normal growth level of 24%. If those extra 1 million units will have been consumed within 2010, then the actual growth only reaches 10%. Besides, the preferential policies still continue, but only the range is narrowed down. Form this point of view, domestic auto market is actually at a good pace of development, but only was mixed up by financial crisis.
As for the large range, jam phenomenon is not unusual in different cities, but the consumption of vehicles still far lagged behind that of developed countries. Five amongst every 100 people purchase new vehicles in a normal year in some developed countries, such as American, German, Britain, and Japan. While in China, 3.5 amongst every 100 people purchase new vehicles only in Beijing. The consumption of other provinces far lagged behind that of developed countries. 1 to 1.5 amongst every 100 persons purchases vehicles every year in the costal provinces, including Zhejiang and Jiangsu. Central and western provinces are much lower with only 0.5 amongst 100 persons every year. Their consumption only accounts for one tenth of that of developed countries. The outlook of China’s domestic auto market is still boundless. So it’s too early to bring about the view of an inflection point.
China’s domestic situation is quite different from western countries, including sparse areas, and unbalanced development. And it goes a separated way of development from developed countries. The great achievements, which have been made since 30 years of reform and opening-up, are hard to explain with all kinds of western theories. So is China’s domestic auto market, which will find a Chinese path to development. (translator: qinghua/serena)
See Chinese report please click: http://auto.sohu.com/20100429/n271840636.shtml