Chinese cars running on WTO road Part 2 – Sales

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Thanks to China’s large population, China has become the largest car market in the world, but just 10 years ago, before China joined the World Trade Organization, it was a much smaller market.

In 2000, 2,146,000 vehicles were sold in China. Most people are very proud since China had become the 8^th largest market. The following 10 years witnessed an incredible increase that nobody could have predicted in 2000.

2002 and 2003 was the first blowout era for the Chinese market. The growth rate peaked to 37% and 39% and China ranked 4^th in the world. At that time, demand exceeded supply. Although some new domestically produced cars, like Honda Accord, VW Passat, Buick Regal, are more expensive than overseas market, consumers still want to wait for months to drive their cars home. It was reported the dealers can obtain 50,000 RMB (€5,850) profit from each Accord, so that a salesman built his own Honda store after three-year work.

However, the market cooled down sharply in 2004 and 2005. The growth rate declined to 12.8%. As for a growing market, this is not a reasonable scene. Many car dealers tasted the pain of losses. In 2005, the sales of passenger cars surpassed commercial vehicles for the first time.

After a five-year silence, market rocketed again in 2009 and 2010. Thanks to the preferential policy for small cars’ purchase tax, the growth rate hit 38.8%. Many families brought their first cars, while buyers inthe firstblowout era chose their second cars. China became the largest market in 2009 and broke the US’s sale record in 2010.

2-year seems to be a limit of the blowout eras. In 2011, the market cooled down again. The sales volume will hit nearly 20,000,000 units, still very large, but it means the growth rate will decrease to less than 10%, the worst rate after 2000. This is mainly because the cancel of preferential policy for purchase tax and buying restriction in some cities.

To be honest, if China can maintain a growth rate of 10% in the coming years, it may be reasonable since China has been the world’s largest market, but many people will not be happy. The government needs fast growth to stimulate the economy, while carmakers are building many plants to increase production capacity. If the market slowed down for many years, they will all be losers.

How fast can Chinese car market grow in the future? Two questions should be asked. How fast government will alleviate the congestion in big cities, and how fast the new market can be aroused in small towns and villages.