Automobile sales in China totaled 19.86 million units over the first eleven months of the year. That figure represented year-on-year sales growth of 13.53 percent. The automobile market as a whole looks to have grown 15 percent by the end of 2013. That figure, which has exceeded the expectations of many analysts, will represent a new turning point for the market, which only managed very minor growth over the past two years. The figure is also more indicative of the actual demand in the market, as several stimulatory economic policies have already been phased out.
That said, it is still difficult to say how the automobile market will perform next year, as there are still quite a few unpredictable factors influencing the market. These include a questionable level of consumer confidence, increasing environmental pressures and the spread of policies limiting new vehicle registrations.
To better understand predictions for next year, Gasgoo.com (Chinese) has conducted a weeklong survey on the issue, with 1,763 individuals from the industry taking part.
In the first question of the survey, participants were asked to predict how much the market will grow next year. The majority of respondents, 57 percent, expect sales growth to be between five and ten percent, while 28 percent predict growth of between ten and 15 percent. In total, over 80 percent of the survey participants anticipate sales growth of five to 15 percent. By comparison, only eight percent of respondents predict growth of over 15 percent and nine percent believe total growth will be under five percent.
There are several reasons behind this optimistic perspective. Firstly, recent stable economic growth this year has convinced many analysts that consumer confidence is on the rise. Likewise, Chinese demand for automobiles is still high, with many prospective buyers looking forward to the prospect of owning their very first automobile. The growing number of new options available due to the increasing competition is another factor stimulating consumer demand.
However, the growing popularity of policies restricting new vehicle registrations, increasingly severe traffic congestion and limited number of parking spaces are all factors which can limit how much growth the market can achieve. In fact, many automobile buyers this year may have purchased their vehicle due to anxiety of impending policies limiting new car registrations.
Accounting for these factors, China Association of Automobile Manufacturers Deputy Secretary General Dong Yang predicts a growth rate of between eight to ten percent for the Chinese automobile market for the next decade.
As environmental pressures continue to mount, the matter of which kind of vehicles will perform well in the market next year is another topic of interest. In the second question, participants were asked which vehicle types will be hot sellers next year. 54 percent of respondents expect hybrid models to do particularly well next year. 27 percent are looking towards compact models, while 14 percent predict new energy models, such as pure electrics and plug-in electrics, to be relatively successful. Only five percent of respondents voted for diesel models. These results are close to those from a similar survey conducted two months ago.
According to the government's official guidelines, average fuel consumption rates for passenger automobiles in the country are expected to decrease to 6.9 liters per 100 km by 2015 and 5.0 liters per 100 km by 2020. In order to achieve these targets, China will have to make significant strides next year. According to statistics from the Ministry of Industry and Information Technology, the average fuel consumption rate for passenger automobiles last year was 7.38 liters per 100 km. The preference Chinese consumers have towards big luxury cars and the growing popularity of SUVs are two major obstacles to reducing the amount of fuel the country spends.
Hybrid models were a major highlight at this past November's Guangzhou International Automobile Exhibition. At the event, Toyota announced the completion of its $700 million R&D center in Changsha, Hunan. The site will focus on domestic manufacture of hybrid technology. Honda, VW, and even some domestic manufacturers, such as BYD and SAIC, are also expanding plans to develop their hybrid vehicle production lines in China. At the same time, multinational and domestic manufacturers are expanding their compact car sales strategies. Toyota has already begun manufacturing the Yaris and March compacts in China, while Guangqi Fiat and Ford have plans to begin domestic production of new compact models next year.
For several years now, Chinese own brand manufacturers have seen their overall market share taken by multinational enterprises. When asked about their predictions for the next year, the majority of participants, 61 percent, expect own brands to lose even more market share. Only 19 percent believe that own brands will be able to maintain their market share, while the remaining 20 percent were undecided.
Own brands' poor sales performance over the last few months are a sign of how far they behind the rest of the market. According to Gasgoo.com (Chinese) statistics, a total of 564,400 own brand and domestically manufactured joint venture passenger automobiles were sold in November. That figure represents year-on-year sales growth of 18.7 percent, behind the overall market average growth rate of 21.3 percent.
The introduction of new vehicle registration policies is another factor acting against own brand manufacturers. These policies, which are intended to combat rising levels of pollution and traffic congestion, have already been established in Shanghai, Beijing and Guangzhou. Other cities, such as Tianjin and Dalian, are also preparing to implement such policies. With only a limited number of new registration plates, the typical consumer is more likely to purchase the best car they can afford, rather than the most affordable option they can find. Unfortunately, while own brands have proven competitive in the economy segment, their presence in the mid to luxury level segments is limited.
Finally, participants were asked to predict which segment of the passenger automobile market they anticipate to perform the best next year. SUVs were the most popular segment in the survey, garnering 42 percent of the votes, followed by compact cars, which gained 21 percent of the votes.
SUVs increasing popularity among Chinese consumers doesn't seem to be dying down. According to statistics from the China Association of Automobile Manufacturers, production and sales amounts for SUVs in the country in November respectively totaled 316,600 units and 301,300 units. Those figures represent year-on-year increases of 76.64 percent and 59.24 percent, respectively. Over 50 percent more SUVs are expected to have been sold this year compared to 2012. Despite their higher fuel consumption rates, SUVs' combination of more spacious interior, relatively high driver seat positioning and greater range of usability have made them very attractive to the typical Chinese consumer.
The outlook for compact cars, for their part, is favorable due to the sheer number of models available in the segment. In particular, buyers from emerging regions, such as in third-tier and fourth-tier cities, are expected to be especially inclined to purchasing compact cars due to their prevalence in the market.
