China Auto’s 2007: The Final Tally
As reported earlier this week, China produced 8.8 million vehicles in 2007, a 22 percent increase over 2006. Passenger car production led the way with a nearly 25 percent increase to 5.3 million cars, followed closely behind by trucks which increased by over 22 percent to 2.1 million units. Busses registered an 11 percent increase to 1.3 million vehicles.
China is rapidly becoming one of the largest passenger car markets in the world. Over 150 different models of cars are now being produced here, with nearly every global assembler represented. In addition, fast-growing Chinese companies such as Chery, Geely, BYD, Great Wall and Chang’an are taking an ever larger share of the China market. In an industry once completely dominated by foreign brands, passenger cars produced by purely local companies now account for almost 29 percent of the cars made in China.
Within the truck category, the production of heavy duty trucks showed a stunning increase of 59 percent in 2007. China’s production of 487,000 heavy duty trucks last year makes it the largest market in the world for trucks in this category. By way of comparison, the production of heavy duty trucks in the U.S. and Europe vary between 250,000 to 350,000 per year in each market, respectively, depending on economic conditions and other factors.
Although the China market is larger in terms of units, heavy-duty trucks in China tend to be considerably smaller and much less expensive than heavy duty trucks produced for the U.S. and European markets. Whereas a heavy duty truck used in the U.S. or Europe might easily cost in excess of $100,000, a heavy duty truck in China may be purchased for well under the equivalent of $40,000. That is one of the reasons that truck exports from China are growing.
Unlike the passenger car market where foreign brands still dominate, virtually all of the trucks used in China are made by local Chinese companies. Continued growth of the Chinese economy, increased needs for freight transportation, further infrastructure spending, a greatly expanded highway system, and new emissions and overloading regulations are all driving the growth of this segment of the auto market.
Vehicle export figures for 2007 are not yet available. However, China exported 535,000 vehicles through the first 11 months of the year, almost equally divided between passenger cars and trucks. Vehicle exports will almost certainly approach 600,000 units for the full 12 months of the year, which would represent a stunning 75 percent increase over the number of units exported in 2006. Although the majority of China’s vehicle exports now go to the Middle East, Russia, Southeast Asia and the developing economies of Africa, it’s only a matter of time before more end up in the developed markets of the U.S. and Europe.
By any measure, China is now a bona fide major player in the global automotive industry. China’s rise in this industry has been nothing short of meteoric. In 2001, the year in which China joined the World Trade Organization, vehicle production stood at just over two million units. In the six short years since, production has more than quadrupled to its current level. Moreover, most experts predict that China’s vehicle production will increase to more than 10 million units in 2008. At that level, China’s production will be equal to that of the U.S. and Japan, each of which produces approximately 11 million vehicles per year. (Although the U.S. market for vehicles is the largest in the world and has been in excess of 16 million units per year since the late 1990’s, at least 5 million vehicles are imported into the U.S. each year from assemblers in Japan, South Korea and Europe.)
Due to the housing and sub-prime crisis, and an expected recessionary environment in the United States, industry analysts are predicting that the U.S. market for vehicles may fall below 16 million vehicles in 2008 for the first time in many years. As a result, some expect U.S. vehicle production to fall below 10 million vehicles for the first time since 1992.
If that indeed occurs, and China produces more than 10 million vehicles as expected, China could surpass the U.S. in total production in this Olympic year. That’s well before anyone, including myself, could have predicted in their wildest imagination, even as recently as five years ago.
