Analysis: Peak growth rates in Chinese automotive market and maximum number of vehicles on the country's roads

Gasgoo.com (Shanghai) - Due to the existence of many political and economic factors, China's automobile market is experiencing drastic change. According to statistics from the China Association of Automobile Manufacturers, 1.65 million vehicles were sold in the country this September, representing an increase of 5.52 percent from the previous year. Passenger car sales made up 1.32 million of that amount, equivalent to a year-on-year increase of 8.79 percent. Although this performance is slightly better than August's, the overall trend is still quite far away from the rapid growth seen in the previous few years.

As the number of vehicles on China's roads increases, conflicts concerning energy, traffic congesting and the environment continue to increase day by day. Administrative issues have also been on the rise, which is helping to add to uncertainty to the direction the market is taking. While the luxury segment has been sustaining high growth rates, the overall market has been evening out. It remains to be seen whether the past few years will have been the last peak the market has seen, or if there is a new high yet to come.

Gasgoo.com (Chinese) and 21st Century News Group have conducted a joint survey of 2,246 insiders and experts to ask what they thought were in store for the Chinese automotive industry. 42 percent of those polled believe that peak growth will occur three to five years from now, while 35 percent believed that the peak has already been reached and will end within three years. 23 percent of respondents hold a cautious attitude, believing that the current peak would last for at least five years.

Opinions from those familiar with the industry are more conservative than they were before. 30 percent of the respondents estimate maximum sales to be between 20 million and 22 million units, while 28 percent expect maximum sales within 22 million and 25 million units. Only 18 percent anticipate the peak to reach 25 million units, while 24 percent expect that peak to exceed 28 million.

According to an incomplete group of statistics, FAW, SAIC, Dongfeng, Changan, GAC and BAIC's sales targets combined are already above 28 million vehicles, while Chery, Geely, BYD, Great Wall, Brilliance, JAC's combined sales goals total up to 12 million units. Those goals, while having been set when the market was still in a period of rapid expansion, can offer partial insight into the predictions that manufacturers hold for the industry.

With various factors such as increasing traffic consumption, as well as growing lack of parking lots and other infrastructures, there is a definite limit to how far large growth in the domestic industry can be sustained. A majority of respondents, 63 percent, believe that there is a possibility that sales might turn around and start decreasing. When asked for a reason, the overwhelming response was that the amount of vehicles Chinese roads can hold is reaching a breaking point. However, 28 percent of those polled were confident that growth in China's transportation infrastructure would offset any such limitations.

When asked about how many passenger vehicles China would ultimately be able to contain, 37 percent of respondents believed the final number would be around 300 million. Meanwhile, 27 percent were more optimistic, predicting a maximum capacity of 400 million vehicles, while 22 percent believed the final number to be around 200 million. According to statistics from the Ministry of Public Security's Traffic Management Bureau, there are 219 million vehicles total on China's roads as of this August, with 45.88 percent, or just over one million, of those being passenger cars.

According to Ouyang Minggao, head of the Department of Automotive Engineering at Tsinghua University, China will take until 2025 to 2030 to reach a predicted maximum capacity of 300 million vehicles. Director for the State Information Center's Information Resource Department Xu Changming, meanwhile, believes that the maximum number will be as high as 450 million. It is worth pointing out that only a few years ago several Chinese and international groups believed that the maximum number of vehicles that the country's roads could hold would only be around 150 million.

Expanded development in third- and fourth-tier cities will be key for determining what the future market will be like. According to estimations from accountancy firm PricewaterhouseCoopers, if those markets continue to develop at a stable rate, growth in maximum quantity of vehicles able to be held should grow 9.3 percent annually, reaching 27 million units by 2017.