CJReport

When global recession continued and the world's major auto markets experienced negative growth this year, China still saw a positive year-on-year growth of 14% on the auto sales, with its sales of the automobile reaching 4.95 million in the first five months of 2009. By now, China has surpassed the U.S. and become the largest auto market in the world.

Indeed, China experienced a boom in the automobile market in recent years. From 2001 to 2008, strong demands for automobiles could be found in this country, growing at an average annual speed of 24.5%, much higher than the 4.2% of the world's level. Meanwhile, China's auto sales grew at an average annual speed of 21.8%.

In China's auto markets, the sales of passenger vehicle are the major drive for total auto sales. From 2001 to 2008, the sales of the passenger vehicle had the average annual growth of 34.3%, compared to 12.3% for the commercial vehicle. In 2001, 32.9% of the sales came from the passenger vehicles, and this figure changed to 72.0% in 2008.

By the end of 2008, China had 132 auto manufacturers, of which 46 are passenger vehicle manufacturers. The major passenger vehicle manufacturers are joint ventures which are set up by domestic companies and foreign players such as GM, Volkswagen, Toyota, Nissan, Honda and Hyundai. The sales of the joint ventures accounted for 57.3% of the total passenger vehicle sales in China.

Sedans are the main contributor to passenger vehicle sales, contributing to 74.7% of the total sales. In hundreds of Chinese cities, four of them have emerged as the regional hot location for China's auto markets. In terms of sedan reserve, Beijing, Guangzhou, Chengdu and Shanghai rank ahead of other cities. Being the regional centers, they are situated in the north, south, west and east of China respectively.

There are 1.74 million sedans in Beijing by the end of 2008, the top among all the cities. The vast and populous urban area, well established traffic infrastructure, and relatively high per-capita GDP and household income are the main reasons why Beijing turns to be the largest auto market in China.

Besides, Beijing is one of the major auto manufacturing bases in China. In 2008, Beijing's output of automobiles reached 766,000, up 8.4% over the previous year. The output of sedans accounted for 283,000 of the total, up 39.6% from 2007. Beijing Motor Group is the leading manufacturers in this region, with its four subsidiaries, including Foton, Beijing-Hyundai, Beijing Benz-Daimler Chrysler and Beijing Automobile Works (BAW).

Guangzhou, Guangdong Province's capital, ranks the 2nd by sedan reserve. By the end of 2008, there are 1.49 million sedans in Guangzhou. Its surrounding area, the Pearl River Delta, is one of China's most developed regions. The neighboring cities like Shenzhen, Dongguan and Zhuhai, all of which have relatively high GDP per capita in China, are large markets for automobile industry.

Benefiting from this market, Guangzhou becomes the country's largest auto manufacturing base. In 2008, Guangzhou's auto output reached 881,600. Guangzhou Automobile Group, China's fourth largest auto manufacturer, has set up joint ventures with Toyota and Honda. In 2008, Guangzhou Automobile realized auto output of 530,000 and motorcycle output of 930,000.

Being the southwestern Sichuan Province's capital and China's fourth largest city by population, Chengdu has the largest automobile market in west China. By the end of 2008, Chengdu's sedan reserve reached 0.83 million, ranking 3rd in the nation. Although Chengdu is considered to have large market, it is not a major auto manufacturing base. In 2008, Chengdu's automobile output was 71,000, much lower than the aforementioned manufacturing bases like Beijing and Guangzhou. Chengdu also does not have any leading domestic auto manufacturers like Beijing Motor or Guangzhou Automobile.

The market potential in Chengdu has already drawn the attention of the overseas investors in recent years. Moreover, presences of an aggregation of auto parts manufacturers and the local government's support are also bonuses for whole vehicle manufacturers, just like Toyota and Volkswagen, who have invested there. In 2009, despite the downturn of global auto market, these two players increased their investment in Chengdu. Their new plants, which are jointly set up with the First Auto Works, will increase Chengdu's output of autos by 30,000 and 150,000 units respectively.

Shanghai is the economic center of China and the second largest city by population, but there were only 0.72 million sedans in Shanghai. Shanghai's strict regulation on the car registration number is the main reason for this phenomenon. The shortage of registration number results in high price for a number, which stands at least RMB 28,000 (US$4,100), too high for its residents.

However, although Shanghai's auto market is restricted, it still has great market potential due to its position as the national economic center. Its surrounding area Yangtze River Delta, which consists of part of Zhejiang and Jiangsu Provinces, contributes to 1.0% of China's land area, 5.8% of its population and 21.6% of its GDP.

When the global auto market continued to be in the downturn, China's growing market seems to be attractive for investors. China's central and western regions, where there is less impact from the recession than the coastal areas, will be highlighted in this market.