China’s Auto Sales Challenge

ChinaPassengerCarSales.jpgBy John Richardson

THE assumption behind big investments in auto capacity in China – and in butadiene, synthetic rubber, polypropylene (PP) and other chemicals and polymer capacities linked to the auto industry – is that, eventually, Western levels of car ownership will be achieved.

But Hou Yankun, head of China Equity Research and head of Asia Autos at UBS Securities, told the China Daily in this article that 2013 will witness the “last wave” of sales surges in China’s auto industry.

The China Daily wrote: Theoretically speaking, if car affordability continues to follow the examples of Japan and South Korea, sales could maintain rapid growth for at least 10 years in China.

But Hou said the ability of the country’s roads to cope with that level of growth is already being stretched.

Data show that there are about 550 cars for every kilometre in Beijing, compared to 300 even in packed Hong Kong.

The average annual mileage of cars in the mainland is five times that of Hong Kong, added Hou.

“It will be a challenge for the government to raise the speed of road construction, to keep pace with the acceleration of auto ownership,” he said.

Mega-cities including Beijing and Guangzhou have already introduced car-purchasing restrictions, and people in Shanghai have to enter an auction for car licenses because of massive demand.

Statistics show cities such as Fuzhou, Tianjin, and Nanjing are all suffering from low average driving speeds caused by chronic traffic congestion, which may force the local governments to consider purchasing restrictions, Hou said.

This serves to underline how China’s growth story is becoming ever-more complex and ever-more nuanced.

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