Domestic auto market presents new trends

Along with the booming of China's auto industry and the quick expansion of market scale, auto market in China is taking on six trends: internationalized development pattern, sustainable market growth, intensified competition, individualized consumption demand, private cars dominant, and second hand vehicle market expanding.

At present, the 11 biggest multinational automakers have had access to China, and the majority of top 50 parts and components producers have set up manufacturing plants in China. Domestic competition in auto market has turned into international competition, especially in the fastest-growing saloon car industry, where the competition of cars above intermediate level basically exists among multinational giants.

According to statistics from China Association of Automobile Manufacturers, the production and sales volume of commercial vehicle in 2006 was 2.0466 million and 2.04 million respectively, most were self-owned brands. The production and sales volume of passenger vehicle was 5.2331 million and 5.176 million, in which self-owned brands took up 41 percent. The number of saloon cars distributed in 2006 was 3.8289 million, accounting for 53 percent of total vehicle sales of the country. Sales volume of self-owned brand saloon cars was 982800 last year; with 25.67 percent market share, it wasn't the first rank any more. The Japanese-brand saloon cars achieved a sales volume of 983600 last year, taking account 25.69 percent of total made-in-China cars; it occupied the biggest market share.

The brands that ranked from third to seventh were German-brand, American-brand, Korean-brand, French-brand, and Italian-brand. Cheng Meiwei, chairman and CEO of Ford Motor (China) Ltd., said that as multinational vehicle giants continuously increase investment in China, and set up R&D centers in succession, the internationalization characteristic of China's auto market is getting clear. China is an important part of global auto market, as well as the fastest-growing emerging market. In the future 20 years, 50 percent increments of world auto industry will be created in China.

At the end of 2001, China entered into World Trade Organization. Then in 2002 and 2003, China auto market increased explosively, and part of potential demand was released ahead of schedule. During 2004 and 2005, the market fell into a slump, which however, was still growing above global average level. In the year of 2006, both the production and sales of vehicle were increased by more than 25 percent, indicating that China's auto market has stepped into a sustained development period. Jiang Lei, Executive Vice Chairman of China Association of Automobile Manufacturing, said that guided by huge market demand, the vehicle consumption in 2007 will maintain a double-digit growth. It is predicted that the year-on-year increase of production and marketing shall be 15 percent, with a total volume reaching or surpassing 8.5 million. The saloon car increase shall be higher than the overall growth still.

The third trend is intensified competition. Because of reasons like excessive vehicle manufacturers and surplus production capacity, the market competition in recent years has been pretty fierce, and price war is rising one after another. As insiders estimated, price war shall not come to a stop in a few years. But consumers now concern more and more about quality and after-sales service, so pure price competition shall have less and less appeal.

The fourth trend is individualized consumption demand. In order to satisfy consumers' diversified demands, domestic vehicle manufacturers continuously push ahead new models, with more than 100 per year in the past two years, including entirely new models and modified models. Experts reckon that too many new models may lead to disappointed sales of a single model, which therefore doesn't make good for improving the scale benefit of enterprises.

The fifth is that private consuming is turning into the mainstream. Since China entered into WTO, auto market was opened to foreign countries, pulling the rapid development of domestic auto industry. The government then issued a series of policies encouraging cars' entering into family. The saloon car market, which had been focused on institution consumers, has turned to be dominated by personal consumers. Private ownership has been the mainstream of saloon car consuming. A report from China Automotive Technology & Research Center pointed out that private consuming has increased from 58 percent in 2001 to 77 percent in 2006. The latest figure released by National Bureau of Statistics shows that, with the increasingly growth of saloon cars entering into family, the number of civil cars in China was 15.45 million up to the end of 2006, in which private cars were 11.49 million, up by 33.5 percent than 8.6067 million of late 2005. Private cars have accounted for more than 74 percent of the total of the country.

The sixth trend is the rapidly expanding second hand vehicle market, which may become the new hot spot of auto market. According to the latest statistics from China Automobile Dealers Association, the volume of second hand vehicle transaction of 2006 reached 1,905,900, up by 31.5 percent compared with previous year. This was the third year that the increase rate of second-hand vehicle sales higher than that of new vehicles.

Though the growth of second hand vehicle sales was 6.27 percent above new vehicles in 2006, the quantity was only 26.4 percent of new vehicle sales. Second hand market is an important part of auto market, and it has been the domination of vehicles sales in developed countries, where the sales volume of second hand vehicle is times of the new ones.

The sources of second hand vehicle are enlarging, and more car owners want to replace their cars. Some experts think that China's auto market will march into a "replacement era" this year, and domestic second-hand vehicle market will show blowout in the future two years.

Source:CE.cn