China auto industry enters 2nd fast growth stage

China's auto industry is entering into the second stage of fast growth this year, according to Xu Changming, director of Information Resources Department under the State Information Center. 

During the first half of this year, China's passenger vehicle sales surged upon robust demand and consumer confidence. It is predicted that the 2009 annual auto demand will surpass 11.5 million units.

Xu said that China's passenger vehicle market development was far better than macro economic growth during the year's first half.

During the same period, the passenger vehicle market saw a structural growth, with small-displacement and low-price vehicle sales surging rapidly.

According to statistics released by the State Information Center, retail sales of passenger vehicles with engines of less than one liter rose 46.6 percent, while those of 1-1.6L passenger vehicles surged 52.7 percent. Retail sales of passenger vehicles with engines of more than 2.5 liters dropped 15 percent, and those of 2-2.5L passenger vehicles edged down 1.8 percent.

Sales of passenger vehicles at a price of less than 100,000 yuan per unit boosted 42.8 percent. Sales of those of 100,000-150,000 yuan per unit jumped 38.8 percent, while sales of vehicles of more than 250,000 yuan per unit fell 14.1 percent.

Vehicles that have enjoyed rapid growth were mainly those included in the state stimulus package to cut passenger vehicle purchase tax by half.

Industrial insiders generally believed that the sales surge in auto market was mainly supported by the favorable state auto policies, but they were concerned about whether the sales surge would be able to continue during the year's second half and the following year.

Chen Binbo, deputy general manager of Dongfeng Nissan's marketing and sales division, held that the first half's sales surge was not temperate. Around 300 million people in China's first-tier, second- and third-tier city markets are about to purchase vehicles. The market potential is huge.

According to a research, a country would generally experience two sales surge periods for the auto industry. The first period would last about five years, with annual sales growth of 30 percent on average. The second period would continue for around 10 years, with average annual sales growth of 20 percent. Both Japan and South Korea have been through such two stages.

Xu held that China is now entering the second stage of fast development. China's auto population is relatively low. Many families are buying their first cars, especially in second- and third-tier cities. Without such rigid demands, the auto industry boosting policies might not work so well.