Analysis: Chinese passenger automobile market expected to exceed 30m by 2024

According to statistics reported on by Gasgoo.com (Chinese), a total of 11.25 million passenger automobiles were sold in China over the first half of 2017. That figure represents a slight year-on-year growth of 1.61%. That growth rate is over 7.6 percentage points less than last year’s rate. How production and sales volumes will grow over the upcoming years depends on how market will continue to change.

According to research conducted by the State Information Center, the Chinese passenger automobile market will increase to 34 million units by 2026. If going by American standards, the country should be able to have a maximum of over 60 million passenger automobiles. However, given the population density of China, Japanese standards may be much more applicable; according to Japanese standards, China should be able to maintain a maximum of over 40 million passenger automobiles.

Currently 80.6% of all Japanese households have an automobiles; this is much higher than the current rate in China. Studies suggest that China will have over 250 passenger automobiles for every 1,000 people, which would total 360 million passenger automobiles in the country.

There is a vast discrepancy between the amount of passenger automobiles owned by urban dwelling Chinese residents and those living in the countryside. Increasing urbanization rates should lead to a huge increase in passenger automobiles. Third- and fourth-tier cities have already become major focal points for market growth in the upcoming years.

In contrast, when the Japanese passenger automobile market was still developing in the 1960s, the majority of passenger automobiles were owned by rural residents. This is the opposite of the Chinese market. In China, 92.1 of all passenger automobiles are owned by urban residents, compared to 7.9% owned by rural residents. Those rates are expected to change to 82.8% and 17.2% by 2026.

As of 2016, there are over 792 million people living in Chinese cities, up 21.82 million people from the previous year. By comparison, there were over 589 million residents living in rural areas, down 13.73 million people. In 2016, 57.35% of all Chinese residents lived in urban areas; that figure is expected to grow to 71.7% by 2026.

Another important issue to consider when analyzing the Chinese passenger automobile market is the sale of cars to companies and corporations. Demand by companies for passenger automobiles is set to reach 1.51 million automobiles by 2026. Of that amount, 59.6% of automobiles are set to be used by the companies themselves, while the remaining amount are rented out or used as taxis.

Demand from companies for automobiles has been decreasing due to the introduction of legislation limiting what automobiles state-owned enterprises can purchase. In 2014, a total of 906,000 automobiles were bought by companies; by comparison, total automobile sales to companies for 2017 is forecast to be 791,000 vehicles. While annual demand should still grow over the next few years, it still isn’t predicted to reach the one million mark.

Automobile rental companies are suggested to be a major driver for automobile sales made by corporations. Purchases of automobiles used for car rentals is expected to increase 13.2% from 273,000 units in 2016 to 350,000 units in 2020. This includes both long-term rentals for companies and short-term rentals for individuals. Increased urbanization is one of the core reasons behind this growth.

Chinese population growth is set to reach its peak in 2020, with the amount of people aged between 25 and 34 to increase in the years leading to 2020. As the overall population becomes older, GDP growth slows down and consumer buying preferences change, new car sales are expected to decrease as well.