TOKYO -- Growth in the Chinese car market has slowed considerably in the past two years but it will continue at a steady double-digit clip in line with the country's economic growth, auto executives said on Tuesday.
Sales of passenger cars in China doubled to about 2 million vehicles in 2003 from 2002, but the rise slowed to 15 percent in 2004, causing a supply glut and a fierce price war as automakers sought to work down inventory.
But executives speaking at an industry conference ahead of the Tokyo Motor Show said a fast-growing economy, rising incomes and improving roads would ensure an annual expansion of at least 10 percent for the foreseeable future. "We're very bullish," said Kevin Wale, president of GM China Group, which has enjoyed surging demand that looks set to catapult it above Volkswagen AG as China's top-selling brand soon.
Despite falling profits, many global automakers are counting on China for much of their growth as other big car markets around the world stagnate.
Katsumi Nakamura, president of Dongfeng Motor Co., the local joint venture company of Japan's Nissan Motor Co., agreed with Wale, adding that car consumption would get a big boost from the large population of 30-somethings once they have children.
"Car sales in China depend not just on consumer needs but government policy, so we don't expect to see growth at the 50 percent level again," Nakamura said. "But we do anticipate stable growth of 10 to 20 percent."
The Chinese government, which tightened credit last year to slow a red-hot economy, last weekend projected automotive demand including commercial vehicles to reach 8 million to 9 million units a year by 2010, compared with around 5 million last year.
Even that would leave the country with enormous potential for further sales, since there would still be only four cars per 100 people in 2010, China's official Xinhua news agency said.
The fledgling but growing auto financing business in China would also help spur demand, said Noriaki Yamada, president of FAW Mazda Motor Sales, Mazda Motor Corp.'s local sales venture.
"Right now only about 10 percent of car sales are financed by auto loans. By 2010 maybe that will rise to 30 percent," he said. "It wouldn't be a stretch to expect 10-12 percent growth (in Chinese car sales)."
Upmarket BMW, meanwhile, expects the market for premium cars to be even more promising, since they account for just 2 percent of the Chinese market versus around 10 percent elsewhere.
"The premium segment in China will continue to grow because customers want the original," BMW Chief Executive Helmut Panke told reporters at a separate event earlier in Tokyo. "(China) is not that different (than other markets). It is just bigger in its potential."