China Ends U.S.’s Reign as Largest Auto Market (Update2)
Jan. 11 (Bloomberg) -- China supplanted the U.S. as the world’s
largest auto market after its 2009 vehicle sales jumped 46 percent,
ending more than a century of American dominance that started with the
Model T Ford.
The nation’s sales of passenger cars, buses and trucks rose to 13.6
million, the fastest pace in at least 10 years, according to the China
Association of Automobile Manufacturers. In the U.S., sales slumped 21
percent to 10.4 million, the fewest since 1982, according to Autodata Corp.
China’s vehicle sales have surged since 1999 as economic growth
averaging more than 9 percent a year has helped automakers including
General Motors Co. and Volkswagen AG compensate for slumping demand in
the U.S. and Europe. The market will likely remain the world’s largest,
even as sales slow this year on a reduction in tax cuts, according to
Booz & Co.
“China is becoming the center stage of development for the 21st century
global auto industry,” said Bill Russo, a Beijing- based senior adviser
at Booz & Co., which advises automakers. “Economic growth has directly
translated into growth in automobile sales.”
December sales of passenger cars, trucks and buses rose 92 percent to
1.4 million. For the whole of 2009, passenger-car sales rose 53 percent
to 10.3 million.
“The incredible growth rate last year is not going to be repeated in
2010,” said Yu Bing, an analyst at Pingan Securities Co. in Shanghai.
“Automakers will face rising challenges in China this year with slower
demand growth and increasing competition.”
China’s government last year halved the sales tax on new vehicles to 5
percent and offered 5 billion yuan ($732 million) in cash to replace old
ones, insulating the country from slumping global demand. The Chinese
government announced plans on Dec. 10 to scale back the measures,
including raising the tax on new vehicles with engines of 1.6 liters or
smaller to 7.5 percent.
China’s vehicle ownership climbed to 51 million by the end of 2008 from
1 million in 1977. Per capital disposable income for Chinese households
increased 46-fold in nominal terms during the period, also making the
country the world’s biggest markets for products such as cell phones,
beer and microwave ovens.
GM and Volkswagen have targeted growing Chinese demand to compensate for
slumping sales in the U.S. and Europe.
GM, the biggest overseas automaker in China, said on Jan. 4 that its
Chinese sales rose 67 percent last year to a record 1.83 million
vehicles. Shanghai General Motors Co. sold 727,620 cars last year, an
increase of 63 percent. GM sold 1 percent stake in Shanghai GM in
December to partner SAIC Motor Corp., China’s largest domestic
automaker. The $84.5 million deal will leave GM with a 49 percent stake
in the venture.
Sales at SAIC-GM-Wuling Automobile Co., China’s largest minivan maker,
rose 64 percent to 1.1 million vehicles, accounting for about 60 percent
of GM’s China sales. The minivans are sold for as little as $4,000 each.
Ford Motor Co. is spending $490 million on a third plant in China, while
Volkswagen plans to invest 4 billion euros ($5.7 billion) in the country
by 2011. Seoul-based Hyundai intends to build a third Chinese factory as
it aims to boost local capacity by 50 percent to 900,000 vehicles a year
China had 117 automakers at the end of 2008, according to the automobile
association, raising the possibility of overcapacity. Automakers should
“keep their heads cool” to prevent expanding production beyond demand,
Chen Bin, who oversees regulation of China’s auto industry at the
National Development and Reform Commission, said last year.
Henry Ford introduced the Model T in 1908 as the world’s first
automobile affordable for a mass market. The car was produced at the
Piquette Plant in Detroit, helping the city become synonymous with the
auto industry. GM, also based in the city, grew into the world’s largest
The U.S. has since lost out to Asian carmakers producing cheaper and
more fuel-efficient models. Toyota Motor Corp. ended GM’s 77-year reign
as the biggest automaker in 2008. General Motors Corp. and Chrysler also
both filed for bankruptcy as the worst recession since the Great
Depression sapped auto sales.