Abstract
Following a rapid decline in sales growth in 2008, the government has stepped
in to support the industry.
BMI' s recently published China Automotives
Report highlights the progress that has been made since new
incentives,
such as tax cuts on small cars and scrappage schemes in rural areas, were
introduced.
February' s passenger car sales of 607,984 units were 33%
higher than the 456,901 sold for the same
period in 2008, according to
data from the China Passenger Car Association (CPCA). The plans are
aimed
at returning the market to average annual growth of 10% over the next three
years. This is
optimistic in relation to BMI' s forecast for the sector,
which projects single-digit growth for 2009-2010,
returning to 12% in
2011. Our average annual growth projection for the next three years currently
stands
at 8%.
Although growth is expected to be much lower over BMI' s
forecast period, carmakers are still taking
advantage of the market' s
potential. Speculation is rife that Italy' s Fiat will commence production of
a
small car in the region after a supplier claimed to have provided them
with a quote for parts. The most
likely model to fit the profile is the
Linea small car, which is designed for and built in emerging markets.
However, Fiat has been without local production facilities since dissolving
its joint venture with Nanjing
Automobile, thus further details are
unclear. Domestic manufacturers are also tapping potential as the
country' s electric car race heats up. Chery Automobile has become China' s
second domestic carmaker to
produce a fully battery-operated vehicle with
the unveiling of the S18.
The rankings have remained largely the same in
BMI' s Business Environment Ratings for the automotive
industry in Asia
Pacific. China still leads the regional rankings with a slightly lower score
of 66.5 out of a
possible 100. The market' s highest scores are still for
its production and sales growth potential, based on
BMI' s forecasts to
2013, even thoughthe first signs of a slowdown in the market are evident.
However,
even though a low level of vehicle ownership can look tempting in
terms of possible growth, the low
score for country structure, caused by
the large gap that exists between wealthy towns and poorer rural
areas,
acts as a clear restriction on potential penetration. In terms its
macroeconomic environment, a
relatively healthy long-term political and
economic outlook ensures strong scores for the country' s risks to
realisation of returns.
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