China's auto production to slow down

The Chinese automobile industry has been growing at double-digit annual rates. But will it still continue?

CSM Worldwide Inc, an automotive industry research company of the US, says some signs indicate the growth will slow down in the near future.

CSM forecasts auto production focusing on light vehicles (vehicles with a total weight of 3.5t or less). According to its forecasts, Chinese production will reach 10 million units in 2010, but its year-on-year (YoY) growth rates will fall below 10% from around 2011, drop further to 5% in 2012, approximately 3% in 2013, about 2% in 2014 and remain flat thereafter.

Chinese automobile production exceeded seven million units as of 2007 and is continuing to rise by one million units every year. The output will total nearly 80 million units in seven years if it grows at the current rate.

Combined with the automobiles currently owned by consumers, the total number of automobiles in China will easily surpass 100 million. There is no doubt that China is a huge market, but its current growth rate will not necessarily continue forever.

CSM cited some factors behind the expected slowdown. All these factors result from the sluggish growth of the Chinese domestic economy. One of them is the risk that the jobless rate might increase if production of low value-added, labor-intensive products is shifted to low-cost nations outside China due to increasing wages and material prices in China.

In addition, automobile sales will also be heavily impacted by the higher automobile penetration in China's coastal areas, as well as the polarization in income between its inland areas and coastal areas that is expected to continue, CSM forecasts.

Development in BRICs has made a significant contribution to the automobile industry's growth thus far. But, possibly, this will no longer be the case in China in the near future. India, which is considered to come after China, is expected to maintain its growth at about 5% in 2014, CSM says. It might be too soon, but I think there needs to be a strategy for post-China India.