Auto sales in China began to slow in May and have been flat or negative since.
The main reason behind the slowdown is the Chinese government's moves to cool the economy, including discouraging banks from making loans.
TRW Automotive Inc.'s sales also have taken a big hit. But that hasn't dimmed TRW's enthusiasm for China.
John Jones, TRW Automotive vice president of operations in Asia Pacific, has spent more than a decade in Asia. He shared his thoughts on the slowdown with Special Correspondent Alysha Webb in Shanghai.
How were TRW's China sales in past years, and have you been hurt by the slowdown?
From 1997 to 2003, sales of products that TRW Automotive manufactured in Asia-Pacific had a compounded annual growth rate of 70 percent. That does not count parts we shipped into the region. China is our fastest growing market worldwide.
We got hit quite heavily by the slowdown in July and August. When you are importing parts from Europe, you have a two to three month pipeline.
So you get buildup in China you don't want. It did hit us on sales. For the first half of the year our China sales were up 20 to 25 percent. Full 2004 sales growth will be flat if not slightly negative. For 2005, 15 percent growth is TRW's target.
Why the sales rebound in 2005?
When the Chinese government sets their mind to do something, they do it, but it tends to be very severe. But they will start to let the brakes off. I think this is a very planned economy. But the demand is still there.
There's lots of talk about what kind of landing China's economy will have now that the government measures seem to be having an effect. What do think?
I think it will be somewhere between soft and semi-soft. I don't think it will be hard. If it is semi-soft, the current automotive market slowdown will have a 12 to 22 month impact. That would only slow the growth; I don't think it would stop the growth. Looking five to six years out, I don't think it will have any major change to the market growth.
Do you think all the optimistic growth forecasts before the slowdown reflected wrong assumptions about the size of China's passenger car market?
There are those who talk about 1.5 billion Chinese people, and everyone has a car. That is nonsense. As growth moves inland, it will slow dramatically. I think the problem for the government is how to distribute the wealth throughout the geography of the country. People have got to be earning money before they can buy car.
On a personal basis, I think there is a tremendous market potential in China. I think you will see the indigenous Chinese companies start to come out with their own brands.
What indigenous automakers look good to you?
Chery and SAIC (Shanghai Automotive Industry Corp.). SAIC has the strength to go it alone. Chery has very fresh ideas for China. They are coming at the problem from a different approach, not the usual state-run company that just says "Let's do a joint venture to learn the technology."
You may e-mail Alysha Webb at