China on Track To Produce 10 Million Vehicles in 2008
This year will forever be known as the year of the Olympics in China. But long-term, 2008 may be better remembered as the first year in which China’s auto industry out-produces vehicle assemblers in the United States.
While the U.S market, at 16 million vehicles or more per year, is still considerably larger than China’s, the output of U.S.-based assembly plants is approximately 11 million units annually, with 5 million or so vehicles imported each year from Japan, Korea and Europe. Due to the slowdown in the U.S. economy, many analysts are predicting that U.S. vehicle output in 2008 will be less than 10 million vehicles for the first time since 1992. Meanwhile, vehicle production and sales in China are forecasted to exceed 10 million units in this year of the rat.
Based on the first quarter figures, China’s auto industry is on track to do just that. For the first three months of the year, assembly plants in China churned out almost 2.6 million vehicles, a 21 percent increase from production levels in the Q1 of 2007. Passenger car production, which accounted for 1.9 million units, increased by 20 percent over last year, while commercial vehicles (trucks and buses) accounted for 728,000 units and grew at a 24 percent pace. Of all vehicle categories, heavy-duty truck production led the way with a stunning 59 percent increase. During the quarter, 167,232 heavy-duty trucks were produced in China, making China the largest market for vehicles of this size in the world.
In passenger cars, Volkswagen, with joint ventures in both Shanghai and Changchun, leads the pack with an 18.7 percent market share. General Motors at 9.2 percent is second, but Toyota is close behind with a 9.0 percent market share, followed by Honda at 8 percent. Chery is fifth and is the highest-ranked Chinese assembler with a 7.1 percent market share.
With Asian assemblers accounting for eight of the top 10 slots, the China market may provide a preview of the new world order in the global auto industry. Japan leads the way with four positions (Toyota #3, Honda #4, Nissan #6 and Suzuki #9; China has three (Chery #5, Geely #8 and Tianjin Auto #10) and Korea one (Hyundai #7). The remaining two positions are held by Europe (Volkswagen #1) and the United States (GM #2). As a group, the top 10 assemblers account for 70 percent of passenger car production in China.
Production and sales of heavy-duty trucks were unusually high during the first quarter due to the strength of the underlying economy and a certain level of pre-buying. In July, China will begin implementing regulations that require all six-cylinder diesel engines used in over the road vehicles to meet Euro III emission requirements.
Because of China’s history of on-again, off-again enforcement of emissions and other regulations that increase the cost of doing business for basic industries such as trucking, the market has been taking a wait-and-see approach to July 1. During the first quarter, it appears that truck buyers have decided to take no chances and to purchase the cheaper Euro II vehicles while they can. A truck that meets Euro III emissions standards may cost as much as 10 percent more than the EURO II version of the same truck.
The global auto industry is the largest industry in the world and accounts for approximately 10 percent of global GDP. Long dominated by the markets in the United States and Europe, the center of gravity has now shifted to Asian countries which now represent 40 percent of the global market for vehicles.
Every year since 2001 when China’s entrance into the World Trade Organization reignited the growth of China’s auto industry, vehicle production has grown by at least one million units, registering annual increases of from 20 percent to 50 percent. The numbers for the first quarter suggest that the torrid rate of growth of China’s auto industry is showing no signs of letting up.
