China's Car Sales Explode Nearly 50%

The notion that the US is the world’s largest car market is gone, perhaps forever. China’s light vehicle sales rose 48% in June to 872,900.

The world’s most populous country will produce sales of at least 10 million cars, SUVs, and pick-ups this year. The US number is not likely to be above 9.6 million. China’s GDP is rising at 7% or better. It is hardly in a recession. Its large middle class has access to billions of dollars in capital, partially because of the country’s new $585 billion stimulus package.

The news is an indication that the auto market share war in China will heat up as local companies fight with foreign operations such as GM and VW for sales. Chinese car companies have joint ventures with car firms based in Japan, the US, and Europe. The concern of the outsiders is that China’s auto manufacturers will take what they have learned about product development and manufacturing to build their businesses and take a growing percentage of overall sales.

Companies such as GM may face an uphill battle with the local automakers in China, but they still have to fight it. The largest US car firm may never recoup the unit sales it had in America in 2004 and 2005. GM’s recovery may depend to a very large extent on how well it can do in the Chinese market.

The distance between vehicle sales in China and those in the US is bound to grow next year, especially as unemployment in America passes 10%. It would not be unimaginable to think that China could produce 20% more sales than America does in 2010.

Douglas A. McIntyre