NEW YORK -- China's automobile market has bottomed out and pricing is expected to stabilize this year after a loss of pricing power in 2004, analysts and companies said on Monday at a China investment conference.
Car sales in China grew 15 percent in 2004 after almost doubling in 2003, as heavy investment led to oversupply and price cuts and a government-ordered credit tightening cooled the market.
But demand for cars is still robust as ownership remains very low in China, where there are five cars for every 1,000 people, according to Grace Mak, an analyst of Merrill Lynch who covers China's auto industry.
"Demand will be substantial and exports will grow very fast," Mak said at the China Investment Forum held in New York and co-hosted by Merrill Lynch and Bank of China.
Car sales in China, the world's third largest market, rose 22.4 percent in May from a year earlier, the country's official industry body said in monthly figures released on Monday.
That kind of growth outshines what is seen in mature markets such as North America and West Europe and has attracted a swarm of foreign car makers.
Ford Motor Co., for example, expects its car sales in China to jump at least 50 percent this year, as substantial price cuts become a thing of the past.
"All car companies are making more money in China than they are making in the rest of the world," said Malcolm Bricklin, founder and chief executive officer of U.S. company Visionary Vehicles, which has plans to import Chinese cars to sell in the United States starting mid-2007.
China's auto manufacturers sell the vast majority of their output domestically. But they are modeling themselves after their Japanese and Korean counterparts and have rapidly improved their technology by learning from western partners and rivals.
"China started up at the bottom of the chain and will chew its way up," said Paul Lienert, president of consulting and research firm Global Auto Systems.
Low-priced Chinese car maker Geely Automobile Holdings Ltd. has already made some early progress. It said last month it will soon assign a contractor to assemble its cars in Malaysia for sale in Southeast Asia and is in talks for similar deals in the Middle East and North Africa.
China needs to overcome many obstacles before it cracks the U.S. market, which has higher technical and environmental standards and strong unions. A surge in car imports from China also could result in a political backlash.
Geely, which has learned its lesson the hard way, said it had no plans to enter the U.S. or European market for now. The company started selling motorcycles in the United States a few years ago but sales failed to take off due to quality problems. That line of business is not profitable, Geely said.
"We are not going to touch the U.S. automobile market. It's too big," said Lawrence Ang, executive director of Geely Automobile Holdings Ltd. "We cannot afford another mistake."
Ang added that Geely hopes to enter the U.S. market within the next five years.