Slower Growth Forecast for Chinese Auto Sales


SHENZHEN, China – Expansion of Chinas vehicle population will probably continue to slow, but the market still has room for significant growth, an industry insider told a lubricants conference here.

Chinas automobile industry will still see long-term growth, Gu Xianghua, of the Chinese Association of Automobile Manufacturers, told the CBI Base Oil Summit on Sept. 11. But it will not be as rapid as what we saw in the past.

From 2000 through 2010, annual vehicle sales in China rose from 208,000 to 1.9 million, increasing at an average annual rate of 24.3 percent, Gu said. From 2011 to 2013, the average rate of increase dipped to 9.6 percent, with sales reaching 2.2 million last year. This growth has been one of the major factors in the growth of Chinas lubricant market.

Through the first seven months of 2014, passenger vehicle sales were 8.2 percent higher than the same period of last year, Gu said. Sales of commercial vehicles are down 3.6 percent, but that is due to a 5 percent drop in the number of new trucks, and Gu said the truck trend is expected to reverse eventually. The CAAM predicts that total vehicle sales will rise by 5 percent for the full year.

Sales of sport utility vehicles jumped 35.3 percent during the first seven months, to 212,000 units, Gu said. The number of semi-trailer trucks climbed 17 percent to 16,000.

Gu noted that automobile demand has followed a consistent pattern in developed countries. An initial start-up phase features annual growth rates of around 20 percent and lasts until annual sales reach around 100,000 vehicles. Typically that is followed by a period of rapid growth, with annual sales increases of 25 to 45 percent while ownership remains at less than 50 vehicles per 1,000 residents.

Once ownership reaches 50 vehicles per 1,000 residents, markets enter a popularization phase where annual growth rates usually decline to 5 or 10 percent per year, Gu said. When ownership reaches 200 vehicles per thousand residents, which usually takes about 15 years of popularization, markets enter a post-popularization phase and growth slows further to annual rates of between 1 and 5 percent.

Gu said China is currently in a popularization phase but still has room for significant growth since it has only about 190 vehicles per 100,000 residents.

Chinas national government has adopted a number of policies recently that could have significant impacts on its auto industry, but Gu said their effect on sales trends will decrease as time passes. He noted, for example, that three agencies have issued a joint statement encouraging mergers and reorganization of leading businesses in nine key industries, including the auto industry. The statement also encourages Chinese companies to globalize and take part in cross-border mergers and acquisitions. Gu predicted that this will lead to domestic market share being concentrated with a smaller number of companies, several of which will develop core competitiveness.

The government currently offers subsidies for purchase of vehicles that provide better-than-average fuel economy, and Gu noted that a policy adopted last year calls for significantly larger subsidies on alternative energy vehicles.

Gu said some regulations could have direct impacts on the lubricants industry.

By the end of 2015, automobile emissions standards will reach Phase IV, which will focus on control of nitrous oxides and particulate matter, he said. The Phase IV standard might include a test for particle content in gasoline engine emissions, which will raise requirements for lubricant technology.

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