Sales to surge in China – and US

A SURGE of 5.6 million passenger vehicle sales in China and another of similar proportions in the United States have been predicted for the world’s two biggest automotive markets by 2015.

The soaring sales are expected to drive the Chinese market to nearly 20 million units a year by 2015 and bring about a recovery in the United States market to levels not seen since before the global financial crisis.

Passenger car sales are also predicted to take off in Russia, Brazil and India as family incomes increase over the next five years.

The predictions by leading auto market research group J.D. Power and Associates also reveal that sales of vehicles up to six tonnes in China will reach 19.45 million units in 2015. In 2009, the total market in China was 13.8 million units for the year.

Automotive sales in China have been increasing by more than one million units a year since 2000. Just nine years ago, the market was two million units.

China is already a bigger market than the US, where sales fell below 11 million units last year in the global financial crisis.

But the US market cannot stay at its current level. Analysts believe the US market will have to return historical levels around the 16 million to 17 million mark as Americans who have postponed replacing their cars are eventually forced to return to car showrooms as their cars wear out.

In fact, J.D. Power and Associates is predicting the recovery in passenger vehicle sales in the US in the next five years is likely to outpace the growth in sales of similar vehicles in China in the same period.

As part of that process, J.D. Power predicts a 59 per cent increase in personal vehicle sales in the US to 15 million in 2015 – up from 9.4 million last year.

This is good news for companies like General Motors and Ford which are now making money on US market sales levels of less than 11 million units a year.

A sales level of 15 million for passenger vehicles (which are mostly sold to private buyers) is likely to deliver the sort of bountiful revenues that will get these companies firmly back on their feet and help them to more easily shake the debt monkeys off their backs.

J.D. Power and Associates also predicts strong sales gains in a passenger vehicles for Russia (up 137 per cent to 3.2 million), Brazil (up 34 per cent to 3.3 million) and India (up 67 per cent to 2.8 million).

The forecasts were revealed in a recent study of the personal vehicle market in China which predicted sales of passenger cars would rise to 13.5 million units in China by 2015 – a 56 per cent increase from the 8.7 million units sold last year.

So China will experience a predicted growth of 4.6 million passenger cars by 2015 which will be less than the predicted growth for the US market which is likely to see an increase by 5.6 million units by 2015 as the normal replacement cycle kicks in again.

According to J.D. Power, the main driver of increased personal vehicle sales in China will be lower purchase prices and increased choices due to increased competition.

Vehicle prices have dropped by between 20 per cent (compacts) and 40 per cent (premium mid-size) since 2000. The number of models on offer has risen from less than 20 in 2000 to 235 models in 2009 with hundreds of other models in the luxury, sports or specialty segments among the several hundred thousand car sold as imports.

J.D. Power says 90 domestic and foreign brands will be on sale in China by 2015.

One of the big challenges faced by Chinese car-makers is getting car owners to buy their brands a second time.

More than 80 per cent of car buyers in China are first-time purchasers and only 12 per cent are saying they will buy the same brand again, the report said.

This means most of the millions of first-time owners are open to be swayed into buying another brand when they enter the market for the second timeOne of the key drivers, however, will be the steady increase in per capita income of the Chinese people. J.D. Power predicts that as more Chinese families increase their incomes, the number of passenger cars per 1000 people will rise from its current level of 43 to about 100 cars per 1000 people by 2015.