As measured by first half sales, China has just eclipsed the United States as the world’s largest auto market with total passenger sales for the first six months of the year up 17.7% to 6.1 million while U.S. sales dropped to 4.8 million. This marks the first time since the birth of the mass-produced automobile in 1908 that America is no the world’s largest auto market.
China was inevitably going to overtake the U.S. in auto sales as it has more than four-times its population and unprecedented economic growth, but the severe economic slump and carmaker turmoil in the U.S. combined with China’s aggressive auto sale stimulus package accelerated the process.
Most industry watchers expect China’s passenger auto sales to surpass 10 million for the full year – though it is important to note that China’s sales figures include heavy trucks while U.S. figures do not.
The implications of China’s new primacy for auto makers worldwide are most likely a shift towards cheap, small, fuel-efficient cars. The cars sold in China as the market continued to grow will have to be cheap in order to access the country’s gigantic but relatively impoverished, by Western standards, populace – cheap like the highly-anticipated Tata [[TTM]] Nano, priced at $2,500, not “cheap” like American sedans priced under $20,000. Regardless of concerns about global warming, the cars will also have to be fuel efficient, upwards of 45 miles to the gallon, to be affordable not just to purchase but to use. Similarly, the cars will also have to be small not only so they can be inexpensive and fuel-efficient but because of severe road congestion due the sheer number of drivers and the country’s underdeveloped infrastructure.
The clear point is that European and Asian auto makers, at least currently, are the only ones seemingly able to begin producing the car being described, with an emphasis on Asian auto makers. This leaves U.S. auto makers like Ford [[F]] and the reborn General Motors [[GMGMQ.OB]] out of the picture when the Chinese “middle-class” is tapped.
Mumbai, India-based Tata Motors could be poised to benefit with its previously mentioned Nano. China’s so-called “Big Five” auto makers – First Automotive Group Corporation, Dongfeng Motor Corp., Shanghai Automotive Industry Corp, Chang’an Motors, and Chery Automobile – could also be very big winners. Unfortunately, none of the Big Five are publicly traded on U.S. exchanges and only Dongfeng, with shares available on the Shanghai Stock Exchange, is not privately held.
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