SteelOrbis Shanghai
China's automobile sector is currently going through a period of rapid development. The latest industrial indicators show that
China's vehicle unit output reached 5.28 million during the Jan-Sept period, with the annual output figure expected to exceed seven million in 2006. The total estimated output for 2006 will thus have increased by over 21.5 percent compared to last year. According to widespread forecasts, the figure may reach 8 million or even higher in 2007, with all evidence pointing to a continuation of rapid development.
Currently, the major features of the Chinese automobile market may be listed as follows:
Strong domestic demand for vehicles
Along with sustained national economic development and the increase in family incomes, local demand for commercial vehicles and passenger cars has seen remarkable increases, especially as regards the latter. More people have a strong desire to possess their own private cars. According to approximate statistical data, in the developed eastern and coastland areas of
China, especially in the big cities, about 15-35 percent of residents want to buy a car for family use in the next two to five years. In many cities located in the central and western areas of
China, this figure is around 10 percent or less.
Low prices stimulate consumption
Almost all the world famous automobile manufacturers have now entered
China by means of joint venture
investments. The fierce competition causes automobile manufacturers to quickly advance new models to the market and to decrease sales prices frequently. In the first three quarters of 2006, over 40 manufacturers took part in competitive price-cutting with the average decrease margin reaching 4.41 percent year on year. Of the manufacturers, 70 percent are joint ventures. Because total output (5.28 million) was higher than the sales figure (5.17 million) during the first three quarters, and with the situation of oversupply apparently bound to be prolonged, a continuing fall in sales prices is inevitable. This, in turn, will lead to further sales increases.
Import and Export
According to Chinese customs data, during the first three quarters of 2006 the total amount of import and export of automobile commodities was $36.12 billion; exports worth $20.5 billion represented an increase of 45.37 percent year on year, while the imports valued at $15.6 billion were up 44.61 percent. Therefore, the net export balance was $4.89 billion. Due to the sustained appreciation of the RMB which favors imports, the gap between exports and imports is expected to shrink. However,
China's
automotive vehicles are gaining more and more popularity in developing countries due to their low prices. In 2005,
China exported 160,000 vehicles, while the figure is expected to be 250,000 this year with a growth rate of 56.25 percent. This will partially offset the negative influence of RMB appreciation.
Furthermore, in order to promote the rapid development of the domestic automobile industry, the Chinese government is encouraging local automobile enterprises to turn to research and to develop their own products with independent intellectual property rights. Some related policies have already been issued.
We can with confidence forecast that both the output and sales of Chinese automobiles will continue to increase by remarkable margins in 2007.