Market Developments
China Poised to Become World’s Second Largest Vehicle Market in 2007
With sales soaring for cars of every size and shape, China will pass Japan as the second-largest vehicle market in 2007, after the United States. But the Chinese market still may not be big enough to support all the homegrown manufacturers as well as the foreign automakers trying to do business here.
China has more car brands now than the United States, as companies like Fiat and PSA Peugeot Citroën compete with General Motors, Ford, DaimlerChrysler, Toyota and Nissan in joint ventures with Chinese companies.
The Chinese market is on course to reach almost 6.8 million cars and light trucks this year, more than the Japanese market, although a larger share of the Chinese market consists of small commercial trucks.
By comparison, the United States is on track for sales of almost 16.7 million cars and light trucks this year. For the 18 countries of Western and Central Europe, total sales are coincidentally also expected to be 16.7 million this year, with 3.6 million to be sold in Germany and 2.5 million in France.
Automotive Resources Asia, acquired this autumn by J.D. Power & Associates, forecasts that sales of cars, minivans and sport utility vehicles in China will roar past such sales in Japan next year; $74 billion worth of these vehicles are being sold in China this year, up from $55 billion last year.
Offering inexpensive deals is crucial in China's burgeoning market because brand loyalty is rare. J.D. Power recently found that 80 percent of Chinese car buyers are purchasing their first vehicle, compared with fewer than 15 percent in the United States, Europe and Japan.
Before China entered the World Trade Organization in November 2001, China had some of the world's highest car prices. Domestic automakers and joint ventures hid behind steep tariffs that nearly doubled the price of imported cars.
Falling tariffs and a plethora of new models and new car factories in China have brought prices down to international levels for well- known, globally traded models like the Honda Accord.
Domestic Chinese brands sell even cheaper models - subcompacts at $6,000, midsize cars for $15,000 - which are still too costly for the large majority of the 1.3 billion Chinese but are affordable for the rapidly growing middle class.
Source: International Herald Tribune