China's car market exploded in 2009, propping up an ailing global industry and relegating the U.S. to second place for the first time. In 2010, vehicle sales are expected to slam on the brakes.
Car sales in China will rise this year by as little as 5% to 6%, according to analysts' projections. That would be healthy growth in many markets, but in China it comes after the roughly 50% surge in 2009, when Chinese customers bought about 13 million vehicles, compared with just over 10 million in the U.S.
Analysts say that among global car makers, the slowdown may be particularly severe for Ford Motor Co. and General Motors Co., for which China was perhaps the only bright spot in an otherwise painful 2009.
Auto-market research firm J.D. Power & Associates expects GM's sales in China to dip slightly in 2010. On Monday, GM said its China sales, including Wuling microvans and microtrucks built by a joint venture, rose 67% last year to 1.83 million vehicles. For Ford, J.D. Power forecasts 6% sales growth in 2010, down from 50% growth last year.
The two Detroit makers seem unfazed. "We're pretty bullish about 2010 . . . and China's potential in years to come," said Nigel Harris, a senior Ford executive in China.
GM's Shanghai-based spokesman, Michael Albano, said the company is optimistic about 2010 and intends to maintain its leadership position in China and introduce "almost 10" new products, including a redesigned minivan.
With the slowing market, challenges in the Detroit duo's China business -- such as coping with aging products and maintaining quality while increasing capacity somewhat -- "would start getting more exposed," said Rudy Schlais, a longtime executive at GM who retired in 2001 as its Asia Pacific president and is now an adviser to several Chinese auto brands. "When water goes down in the river, rocks will start to show up."
The good news for global car makers is that China will no longer be the only major market growing in 2010, thanks to the recovering U.S. economy. Vehicle sales in the U.S. in 2010 are likely to grow about 12%, according to J.D. Power.
Even so, the Chinese market is projected to remain larger than America's, by at least two million vehicle sales.
Government stimulus has been a big factor in China's sales boom. Beijing last January halved the sales tax on vehicles with smaller engines, which were by far the fastest-growing segment of the market in 2009. But many customers likely to be persuaded to buy a car have already taken the plunge.
For 2010, the government has reduced its tax cut on small cars. Buyers will pay 7.5% sales tax instead of the 5% rate of 2009, though still less than the normal rate of 10%.
Ford launched its Fiesta, a new subcompact, in March. But its mainstay Focus compact is four years old and isn't due for a redesign in China until 2011 or 2012, analysts say. Another mainstay, the midsize Mondeo, came out in 2007 and hasn't resonated with Chinese customers.
Ford's Mr. Harris said the company's aim for 2010 is to grow faster than the industry. He said Ford may launch "special editions" of some models to keep them fresh and increase the number of dealers by 70 to 310 stores after adding 31 in 2009.
GM, meantime, is expected to refresh its model lineup this year, including the key Buick Excelle and HRV compact cars, which are expected to be replaced by sleeker, significantly re-engineered models, and a redesigned version of the GL8 minivan late in the year, replacing a model dating to 2000.
Thanks to the tax cut on smaller cars and an incentive program that encouraged rural residents to buy new vehicles, demand for the ultra-cheap microvans GM produces with Shanghai Automotive Industry Corp. and Wuling Automobile Co. surged in 2009, pushing up sales of GM Wuling models by 64% to 1.06 million vehicles.
But so many future sales were pulled ahead in 2009 by those incentives that Yale Zhang, a Shanghai-based senior analyst with U.S.-consulting firm CSM Worldwide, says GM is "highly unlikely" to be able to keep the momentum it had with Wuling. J.D. Power expects Wuling microvan sales to slip nearly 6%.
Chrysler Group LLC, meanwhile, has only a small presence in China, without any local production. It sold an estimated 16,000 Jeep, Dodge and Chrysler vehicles in 2009, and the volume is expected to dip in 2010, to 12,000 vehicles.
For Volkswagen AG, the market leader in China, J.D. Power expects overall 2010 sales to rise 5.5% to 1.53 million cars, lower than the industry's average growth forecast for cars.
Despite the expected slowdown, auto makers will still have to expand capacity since many have been operating at maximum output to meet demand.
(Source: irco.biz)
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