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China to Maintain Number One Auto Market Spot

Five-year outlook predicts 55% growth, as U.S. languishes.

by on Apr.22, 2010

China claimed the global sales crown for 2009 and will likely retains it for years, if not forever.

Sales of passenger vehicles in China  are expected to increase from 8.7 million units in 2009 to 13.55 million units in 2015. This increase in sales of passenger cars, SUVs and minivans of more than 55% does not include the sale of millions of light commercial vehicles annually.

If the forecast by J.D. Power and Associates holds true, China will easily remain the world’s largest auto market during the decade to come.

Last year China surpassed the U.S. as the world’s largest auto market as a result of targeted government incentives and aggressive bank lending, which lasted all year, while U.S. politicians wrangled for six  months over what was a short lived but effect Cash for Clunkers program.

Worse, U.S. banks stopped lending to consumers, even as taxpayers poured billions of dollars into them. Most U.S. market forecasts see it languishing in the 12-13 million unit range for the next five years. (See Chinese Auto Market Grows to 40 Million Annually? )

Automakers have recorded substantial profits during  the past few years in China, whose industrial policy requires joint ventures and substantial investment  by western automakers. Moreover, the Communist party controls the hiring in joint venture plants, thereby ensuring the loyalty of workers.

It is the stated policy of the Chinese government to consolidate the auto sector around Chinese companies, while diminishing the role of western automakers’ once they have learned all they can from them.

Thus far the clearest evidence of the plan is state owned SAIC taking 51% controlling interest of Shanghai GM late last year by forcing a cash-starved GM to sell 1% if its 50% share. (See SAIC Takes Controlling Interest of GM Joint Venture)

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