LAST YEAR, China’s carmakers surpassed America to become the world’s top auto market. Thanks to government stimulus measures, including sales tax rebates for purchase of small cars and subsidies for buyers in rural areas, 13.6 million vehicles found new homes, writes Jason Craig.
It comes as no real surprise to those who follow the automotive industry. China’s annual automobile production exceeded one million in 1992; in under a decade this had more than doubled to just over two million and now stands at 13.8 million.
The low-end of the market has been shaken up in recent weeks with the announcement that consumers can purchase the Chevrolet Sail model for as little as $8,300 (£5,500). In just four weeks, 8,000 units have been sold, with 30,000 in backorders.
The Sail’s success is down to its creator, General Motors, who has been able to liaise with Shanghai Automotive Industry Corporation (SAIC) – with whom it has formed an alliance – to offer price-sensitive customers a price-savvy product.
There is another reason why GM is keen to be a frontrunner in the world’s fastest-growing car market; last year it fell behind Toyota in the world’s league table for automakers. Its joint-venture with SAIC should prevent such a recurrence.
Not to be outdone, Ford Motor Company has also set-up operations in China, this time with a more well-known automotive brand: Mazda. Changan Ford Mazda Automobile’s Q1 sales for 2010 jumped 84% – an all-time quarterly best.
These are encouraging figures for the Blue Oval, who is also finding profitability in its North American operations after four years’ in the red. Opting against the £11.6bn bail-out relief offered by the US Senate last year, it posted a £2.7bn profit for 2009.
So what appeal does China hold? With a population of 1.34 billion people, it guarantees car companies growth and stability, and perhaps most importantly profit maximisation due to minimal production costs. Make no mistake; China’s manufacturing industry is a high-yielding cash cow.
In a few weeks’ time, car enthusiasts from across China and scribes from the world’s business and automotive media outlets will converge at the Beijing motor show. They will be given the best idea yet of what the country’s automakers have to offer the domestic and world markets.
They are also ambitious. Zhejiang Geely Holding Group’s recently acquired Volvo from Ford for £1.2bn (one of its largest foreign investments to date), and now means it can snap up western consumer industries and so gain greater industrial expertise.
Singapore’s Prime Minister, Lee Hsien Loong proudly announced in December that Asia was leading the world out of the economic slump, and promised that he would continue to invest in China’s future.
Emerging as the world’s biggest and most influential auto market won’t come cheap and it certainly won’t be achieved overnight, but who would bet against it…