As affected by the economic crisis in the world, auto production and marketing in China slowed down obviously at the second half year of 2008. Thus, at the beginning of 2009, the relevant governmental departments resolutely launched various policies for simulating the automobile sales, so as to achieve positive effect on the auto market. In that way, what are the trends of auto market in 2010? The aggregate analysis is made by Sinotrust for 2010' Chinese auto market in terms of macro-economy, supply, demand and policy.
The auto market in 2009 has got warm again after a cold spell; also, the situation will be good at the beginning of 2010
According to the booming index jointly prepared by the China Economic Monitoring and Analysis Center of National Bureau of Statistics and Sinotrust for auto industry, the booming index for auto industry was 99.6 (growth rate in 2001=100) at the 3rd quarter of 2009, so as to increase by 2.7 as compared with that at the last quarter. Also, as of the 3rd quarter of 2009, three indices, namely, advancement, synchronizing and lag in the auto industry have moved upward since the 1st quarter. This shows that the auto industry in China takes a favorable turn rapidly. Rebounding of boom index and rising of three indices such as advancement, synchronizing and lag in the auto industry show that the auto industry in 2009 has got warm again after a cold spell and such good developing trend will place a solid foundation for the development of auto market in 2010.
Both the manufacturer and dealer have the confidence in auto market
For the auto-maker, the Chinese auto-maker’s confidence index at the third quarter of 2009 was 127.5, up by 2.3 as compared with that at the 2nd quarter. It indicates that the auto-maker has strong confidence in the auto market at the end of year; also, such optimistic attitude is continuously enhanced. For the dealer, the Chinese auto dealer’s confidence index was 117.4, indicating that the dealer looks on the bright side. Also, the confidence index of dealer was increased by 13.9 as compared with that at the 2nd quarter. In addition, the dealer's confidence in the auto market at 4th quarter was obviously enhanced. As per the above analysis, it can be seen that both the auto-maker and dealer are fully confident in the auto market.
As forecasted by several institutions, China’s GDP growth will be over 10% in 2010
The automobile is the durable consumer goods with large income elasticity. Thus, the status of macro-economy is regarded as a key factor to influence the auto market, which will be well stimulated by the favorable macro-economy. As per the public data, the IMF and Citigroup predicate that China's GDP growth will reach 9.0% and 9.8%; also, GDP growth of 11.9%, 10.0% and 10.3% in China are forecasted respectively by Goldman Sachs, Nomura Securities and Australian investment Bank. Compared with other institutions, Deutsche Bank has a lower predictor of 8.3%. According to the above analytical data, it can be seen that a couple of institutions in the western countries forecasted the GDP growth of over 10% in China. Thus, the good macro-economy situation will offer a favorable environment for the development of auto market in 2010.
The auto-maker’s productive capacity is limited, so as to discontinue the blowout growth in 2010
In terms of supply, most automakers have reached the maximum productive capacity. For the joint ventures, on September 26, a SGM dealer at the Asian Games Village Automobile Exchange disclosed that due to the limited productive capacity of SGM, some best-selling models were in short supply. Also, owing to the insufficient productive capacity, Dongfeng Nissan’s best-selling models such as New Sylphy, TIIDA and Livina are unavailable in Beijing, Guangzhou and Shenzhen. The down payment has to be paid for ordering the above models, while the arrival thereof usually needs one or one and a half months. In order to increase the productive capacity, FAW’s New Audi Plant begins to produce Q5 which will have the debut this year as well as A4L which is seriously in short supply. For the home auto-makers, the limited productive capacity is also unable to meet the urgently demands for some best-selling models. For example, BYD’s G3 is to be launched in September, but postponed.
in addition, the messages for expansion of auto-makers’ productive capacity are sent one after another; however, it is impossible to quickly expand the auto productive capacity within a short period of time. Thus, in terms of auto supply, the total output in 2010 will not grow explosively. It is anticipated that the annual growth rate will be kept around 15%.
The depressive demands in 2008 were released in 2009, while serious overdrawing did not occur
As per the data from China Association of Automobile Manufacturers, the growth rate of automobile output was 21.6% in 2007~2009, similar to that in 2007. Sinotrust thought the fast growth in 2009 was mainly attributed to the demands depressed by the financial crisis in 2008. So, the auto demands in 2010 were not overdrawn. In this case, the demands from 2010’ auto market will not be decreased substantially.
The consumers do not swarm to buy the cars at the year end; however, the demands in 2010 are still growing abundantly
According to the on-line survey jointly launched by Sina Car Channel and Sinotrust, 86.9% of over 1,000 interviewees plan to buy the cars recently, among which 44.7% of interviewees expect to buy the cars by the end of year; 42.2% of the interviewees will buy the cars at the next year, so that the consumers do not swarm to buy the cars at the year end. It is anticipated that the demands in 2010 are still growing abundantly.
The car penetration rate in China is still low; the demands for car will be high within the next couple of decades
According to the relevant data, only 53 cars were available for 1,000 people as of June, 2009, while over 600 cars were available for 1,000 people in Europe and Japan. Currently, the car penetration rate in China is still very low and even lower than some undeveloped countries and regions. China is now under continuous growth. With the sustainable growing of Chinese people’s income, the demands for car will last for several decades till the auto market tends to be saturated.
The automobile-related policies have a big influence on the auto market, so as to substantially stimulate the demands for car
According to the on-line survey jointly launched by Sina Car Channel and Sinotrust, the tax on buying vehicles was cut by 50%, so as to produce the biggest influence on the auto market among all the automobile-related policies in 2009. Thus, it could be seen that the consumers were obviously influenced by the automobile-related policies when buying the cars. The measures such as subsidies for car selling at the rural areas and subsidies for car replacement will be extended in the next year, while it is unknown whether the favorable tax on buying vehicles will be continued.
We think the government may take more favorable polices to support the auto market if the car sales volume drops at the 2nd quarter of 2010.
It is anticipated that the car sales volume would be grown by around 15% in 2010
As taking various factors into account, Sinotrust adopts Holter-Winter to forecast the sales volume at the auto market. According to the real-time forecasted results in August, it is anticipated that 11.3281 million passenger cars will be sold in 2010, increasing by 15.2% year on year; 3.7967 million commercial cars will be sold in 2010, increasing by 15.3% year on year. Thus, the growth rate of auto market in 2010 will slow down. As anticipated, the annual sales volume will reach 15.125 million cars, increasing by 15.2% year on year
Author: Tony Liu, Senior Vice President of Sinotrust International Information & Consulting (Beijing) Co., Ltd.
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