How many cars will China buy in 2010?
2009 was an astonishing year for car sales in China. A combination of reduced tax on low fuel consumption cars, and subsidies to rural dwellers to buy vehicles, resulted in a surge in purchases. That surge played a key part in propping up domestic consumption. In fact, if you net out spending on cars, consumption growth in 2009 looks pretty anemic.
How many cars will Chinese people buy in 2010? A research note from China Galaxy Securities sets out some bullish predictions, this is my translation:
‘Increases in income will be the main reason why there is a strong increase in consumption of autos in 2010. According to international experience, when average per capita GDP hits about $1000, a country will start to see households purchasing cars. In 2001, when China’s per capita GDP passed the $1000 mark, households had already started to purchase cars. The number of family cars purchases each year from 2003 -2007 was 1.78m, 2m, 2.93m, 4.11m, and 4.93m - around a 1m increase every year. In 2008, per capita GDP passed the $3000 mark. According to the normal progression, the number of family cars sold should have reached 6m. But because of the financial crisis, only 5.5m were sold.
In 2009, according to the normal progression, 7m cars should have been sold, and in 2010 8m. But because of subsidies to buy, and pent up demand from 2008, the number of cars sold in 2009 was 8.5m. That means in 2009, 0.5m cars that should have been sold in 2008 were sold late, and 1m cars that should have been sold in 2010 were sold early. Adding it up, we predict car sales in 2010 of 7m (the 8m that would normally have been sold, minus the 1m that were sold a year ahead of expectations).’
As someone who cycles around an increasingly gridlocked and gritty Beijing, I find the focus on increasing car ownership bizarre. But with Chinese incomes continuing to rise, subsidies to car ownership remaining in place, and car ownership an importance symbol of status in a status orientated society, its difficult to see a change in the trend.
Here’s a link to Galaxy Securities website.