Earlier this week at the North American International Auto Show in Detroit, I reported on the activities of Chinese car makers eager to crack the North American market. China had four car makers and an importer at the show including Chamco (that’s its SUV, right), BYD, Changfeng and Geely.
Today, in his monthly auto report, Scotia Capital economist and auto specialist Carlos Gomes has this to say about China’s domestic market:
China has been the fastest-growing auto market over the past decade, with sales surging ten-fold to more than 5.0 million units in 2007. Growth has been driven by rapid economic expansion and increasing wealth — double-digit average wage gains over the past decade and more than a three-fold surge in equity markets. Despite this rapid growth, vehicle penetration remains very low at only 27 vehicles per thousand people, compared with a G7 average of 610. With a population of 1.3 billion people and a vehicle fleet of only 35 million, China will continue to experience rapid growth.
While car sales gains moderated to 22% in 2007 and will likely increase by 15% in 2008 to 5.9 million units, China is on target to overtake the United States and become the largest automotive market by roughly 2020. Young people are increasingly becoming an important group of car buyers in China. The average age of car owners dropped to 32 years old in 2006, four years less than in 2005. Surveys indicate that the 25-29 year-old age group accounts for the largest portion of potential car buyers in China, while those between the ages of 18 to 25 already represent more than 11% of overall purchases. With about 200 million people in the 20-29 age group and nearly 120 million in the 15-19 age group, long-term demand growth is assured.
Gomes also has a bleak forecast for the North American car market
U.S. SALES TO SLUMP TO A THIRTEEN-YEAR LOW
Weak first-half vehicle sales will pull full-year 2008 U.S. volumes down to 15.0 million units — the lowest level since 1995 — from an average of 16.6 million over the past 5 years. The fall-off reflects the changing economic environment facing Americans, with purchasing power and confidence undercut by the housing-led slowdown, declining home prices and equity values, as well as moderating job and income gains. High gasoline and interest costs are also cutting into disposable income and discretionary purchases. Estimates suggest that energy and interest expenses now absorb a record 26% of U.S. household disposable income, up from an average 22% during the previous decade, leaving less room for discretionary purchases.Canadian vehicle sales are expected to soften to 1.61 million units in 2008 from 1.65 million last year, with the slowdown concentrated in Canada’s manufacturing heartland — Ontario and Quebec. Weaker U.S. growth, a strong Canadian dollar and slowing exports will undercut employment growth in Central Canada, dampening vehicle demand.