China's auto market growth rate will fall to 10% next year

“There are two main reasons for the slowdown in the growth rate of the Chinese auto market next year. First, the various stimulus policies for auto consumption will be withdrawn. In addition, due to the excessive growth in 2009 and 2010, the actual growth in 2011 has been overdrawn.” Yesterday Zhu Ming, a market analyst at JDPower, a US market consulting firm, told the reporter of the China Business News.

A report published by JDPower predicts that the annual sales volume of the Chinese automotive market in 2010 will reach 18 million, an increase of 30%. In 2011 and beyond, the growth of the Chinese auto market will slow to 10%.

The 10% growth forecast for the auto market in 2011 is the most pessimistic of many recent sales growth forecasts for 2011.

Ding Lei, general manager of Shanghai General Motors, once said: “The entire Chinese market should say that in the long run, the trend of maintaining a rapid growth in the next five to ten years will not change, and there will be some fluctuations in each vintage. I think that 2011 will continue. The probability of growth will not be very large. I now judge it to be a growth rate of around 20%. In the first half of the year, it will be a bit higher, and it will be around 20% for the whole year."

However, JDPower believes that multiple factors have led to a sharp slowdown in the Chinese market. The first is the withdrawal of stimulus policies.

In January 2009, China’s government implemented a policy of halving the purchase tax for models under 1.6L, and accompanied the automobile to the countryside and the old-for-new two measures to boost automobile consumption. This led to the blowout development of the automotive market in 2009. The year-on-year growth rate of automobiles reached 47%, surpassing the United States to become the world's largest automotive consumer nation. In contrast, the global auto market is still stuck in the muddy financial crisis and cannot extricate itself.

In 2010, although the purchase tax was halved by 25%, the market's consumer kinetic energy continued to be released, and the growth rate did not slow down significantly. In the previous October, 14.67 million units had been sold, an increase of 35% year-on-year. Taking into account the traditional sales season in November and December, the overall sales volume in 2010 will reach around 18 million vehicles, surpassing the highest level in the United States.

However, Zhu Ming believes that the central government has realized the drawbacks caused by the excessive growth of automobiles, including urban congestion, environmental pressures, and uncontrolled expansion of production capacity by automakers. In this context, sales growth of automobiles in 2011 will not be allowed to continue to maintain levels in 2009 and 2010.

Therefore, under the premise of maintaining stable growth, stimulus policies in 2011 are bound to withdraw. JD Power's Asia regional director Zeng Zhiling predicts that China's auto sales will grow by 10.5% in 2011. Prior to this, General Motors China Motors' CEO Gan Weiwen also predicted that with the end of the auto sales stimulus plan, China's auto sales growth will slow down to 10% to 15% in 2011.

Due to the rapid slowdown in sales, it may have a negative impact on domestic auto makers.

However, he also emphasized that certain independent brands, especially micro-vehicle makers, are already accustomed to more than 30% growth rate, and have carried out a large number of production capacity layouts in 2009 and 2010, which will face severe challenges. In 2011, there will be a more fierce price war. For manufacturers, they will also face the challenge of inventory.

According to JDPower's statistics, in 2010, the capacity utilization rate of domestic manufacturers reached 88%, of which joint ventures even reached more than 100%; and in 2011, capacity utilization may fall by 10%. "Because of the manufacturing cost, even if the capacity utilization rate is below 75%, the self-owned brand will still be able to maintain profitability. The situation of large-scale losses will not appear, but the days are not as good as before." said Zhu Ming.