17 February 2014

China SignPost™ (洞察中国) #79—“ China Car Sales: New Pockets of Opportunity”

Gabriel B. Collins and Andrew S. Erickson,  “China Car Sales: New Pockets of Opportunity,” China SignPost™ (洞察中国) 79 (29 December 2013).

China SignPost™ (洞察中国)–“Clear, high-impact China analysis.”©

  • China’s market for new passenger cars is maturing, but the overall outlook for 
car fleet expansion remains bright for at least 5-7 more years.
  • Even in a pessimistic scenario, Chinese are likely to buy more than 18 million passenger cars in 2020—a nearly 30% increase over the number of cars likely to be sold in 2013.
  • The greatest market and growth potential lies in (1) “mid-level” cars—250,000- 800,000 RMB (US$ 40,000-130,000) for larger cities and (2) lower cost vehicles for inland regions.
  • Luxury vehicles (RMB 800,000-1,000,000+/US$ 130,000-165,000) are likely to remain an important-but-niche market that grows significantly yet does not become a large slice of the overall market.
  • Areas where new car sales will likely outperform the national average include Henan, Hubei, Sha’anxi, Shanxi, Hunan, Sichuan, Anhui, Yunnan, and Chongqing.
  • As new car sales numbers begin to plateau, carmakers will come to rely increasingly on sales of certified used vehicles and on providing maintenance services to vehicles of their respective brands.
  • China’s used car market has great growth upside over the next decade. 370,000 pre-owned vehicles were traded in 2001, 2.4 million in 2010, and 4.8 million in 2012.
  • China Automotive Dealer Association forecasts that used car sales could reach 20 million units by 2018. This suggests that new and used car sales could be at 1:1 parity within five years.
  • EVs are unlikely to displace gas-powered auto sales, particularly in China’s interior.
  • While most major Chinese cities have basic restrictions on car use, they are unlikely to dampen car sales significantly on a nationwide basis. …

China Car Sales Image

How Sustainable Are China’s Car Sales And What Do They Mean for Volume and Location of Gasoline Demand? China’s market for new passenger cars is maturing, but the overall outlook for car fleet expansion remains bright for at least 5-7 more years. Even in a pessimistic scenario, Chinese are likely to buy more than 18 million passenger cars in 2020—a nearly 30% increase over the number of cars likely to be sold in 2013. The greatest market and growth potential lies in (1) “mid-level” cars—250,000-800,000 RMB (US$ 40,000-130,000) for larger cities and (2) lower cost vehicles for inland regions. Luxury vehicles (RMB 800,000-1,000,000+/US$ 130,000-165,000) are likely to remain an important-but-niche market that grows significantly yet does not become a large slice of the overall market. Areas where new car sales will…