China’s automobile sector growth to slow down

Jan 14, 2005 01:00 AM

China's automobile market is expected to witness more moderate growth in 2005 than it did last year, according to an industry organization. Both China's total vehicle output and sales are expected to rise by around 10 % year-on-year to 5.6 mm units, said China Association of Automobile Manufacturers spokeswoman Zhu Yiping.
Both passenger car output and sales in the nation will reach 2.6 mm units this year, up 12 % from 2004, Zhu said.

The association's statistics showed that China's total vehicle output in 2004 grew 14.11 % year-on-year to 5.07 mm units. Sales of China-made vehicles also amounted to 5.07 mm units last year, an increase of 15.5 % from 2003. Passenger car output grew 11.99 % to 2.32 mm units in 2004, and sales climbed 15.17 % year-on-year to 2.33 mm units.
"Last year's growth and the growth expected this year are smooth and reasonable, although they are much lower than the figures in 2003 and 2002," Zhu told. "The industry will remain on a steady and healthy track if the domestic auto market grows by more than 10 % annually in coming years," she said.

The annual growth of both total vehicle output and sales in China in 2003 and 2002 exceeded 30 %, with passenger car output and sales skyrocketing by more than 50 %. The "explosive" growth in 2003 and 2002 was the result of the release of the Chinese people's long-stifled purchasing power for private vehicles, which harmed the auto industry's healthy development.
"The domestic auto market's growth has been slowing since last year mainly because most purchasing power was digested by the buying spree in 2003 and 2002," she said.

Other negative factors affecting the auto market include the government's macro-economic controls, rocketing oil prices and customers putting off buying cars in anticipation of further price cuts, she said. All of car producers in China were engaged in a bitter price war last year to boost sales. Average prices in the domestic car market tumbled by around 13 % last year, up from 8 % in 2003, Zhu said.
Truck output in China grew 23.21 % year-on-year to 1.51 mm units in 2004 with sales jumping 25.97 % to 1.53 mm units, according to the association's statistics. The nation's bus output and sales stood at 1.24 mm and 1.22 mm units last year, up 8.17 % and 5.12 % from 2003. In December, vehicle output in China declined by 7.43 % to 403,500 units, while sales grew 7.71 % to 486,700 units.

It is reported that China's automakers and dealers currently have total inventories reaching more than 500,000 cars. Combined sales of China's top five automakers -- First Automotive Works (FAW), Shanghai Automotive Industry Corp (SAIC), Chang'an Motor Corp, Beijing Automotive Holdings Corp and Dongfeng Motor Corp -- amounted to 3.49 mm units last year, according to statistics.
The five firms controlled 68.82 % of the total sales of vehicles made in China last year, up from 64.98 % in 2003.
"This is a signal of growing polarization between automakers in China as a result of fierce market competition," Zhu said.

German auto giant Volkswagen's Santana and Jetta, produced at its two joint ventures with SAIC and FAW, were the two best-selling car brands in China last year. Sales of the Santana and Jetta reached 223,000 units and 153,900 units last year.
They were followed by the Xiali made by Tianjin FAW Automobile Corp, the Accord manufactured by Honda's joint venture with Guangzhou Automobile Group, and the Elantra by Hyundai Motor's venture with the Beijing auto group and Excelle by General Motors' venture with SAIC.

Source: China Daily
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