Auto sales: China blows past U.S.

For a view as to where the world is heading, take a close look at automotive sales data coming out of the two largest markets, the U.S. and China. It is instructive -- and a bit frightening.

In the U.S., politicians and executives are patting each other on the back for having survived the recession of 2008-2009. At the same time they are hunkering down for what they call the "new normal" -- auto sales running at about two thirds of the 16 million units a year they got used to calling normal earlier in the decade.

They didn't get much relief in July, as sales continued to sputter along at an 11.6 million unit rate. Edmunds.com analyst Jessica Caldwell called the month "disappointing," particularly in view of bullish forecasts.

China, meanwhile, continues to steam ahead at a remarkable rate, marking milestone after milestone. According to JD Power, car sales there are forecast to steam ahead this year by 20% and reach 15.6 million units.

The Chinese notched some important landmarks in their automotive history this week. Geely, the third largest independent Chinese automaker (i.e., one that is not affiliated with any Western producer) closed on its purchase of Volvo Cars this week from Ford (F, Fortune 500) and named Stefan Jacoby, an aggressive former Volkswagen of America president, as its CEO.

Geely founder Li Shufu, 47, the son of a farmer who got his start in refrigerator parts and motorcycles, has become known as the Henry Ford of China.

Like other automakers, Geely is benefiting from the remarkably buoyant Chinese economy. In July, sales of passenger cars rose 15.4%. China largely escaped the 2008-2009 recession, and auto sales there haven't had a down month since February '09.

Among the Chinese producers, there is a clear line between the haves and have-nots. 85 producers are making cars with 63 different brands. SAIC (SAI, Fortune 500), which partners with GM and VW, commands 20% of the market. It is followed by three companies closely grouped together: Changan, which is associated with Ford and Mazda; Dongfeng, a Nissan and Peugeot affiliate; and First Auto Works, which works with VW and Toyota.

BYD, frequently referred to as Warren Buffett's auto company following his $100 million investment last year, is the leading independent. Known for its battery technology, BYD has enjoyed rampant growth in the past four years, rising from fewer than 100,000 units to more than a forecasted 600,000 this year. After that, JD Power sees sales leveling off and market share falling.