The Fast Lane: China's Auto Industry

Robert Hsu, September 29, 2009

In this Issue:

The Number-One Auto Market in the World
Profit Potential?
Avoid Investments in Export-Driven Japan
Geely Automotive: Making Strides

The Number-One Auto Market in the World

With big names like Warren Buffett and General Motors investing in China's automobile industry, is it any wonder why this sector has garnered significant attention in 2009?

This year, while the U.S. auto industry experienced declining sales and massive government bailouts for two of the big three American automakers, China's auto industry has simply boomed. In fact, China's auto sales have surpassed the U.S. for the better part of the year.

After China's vehicles sales increased nearly 30% during the first eight months of the year while U.S. sales declined nearly 30%, China overtook the U.S. as the largest auto market in the world.

How exactly has China's auto industry been able to overcome economic crisis and struggles of other automakers? Well, that's simple -- government action.

The Chinese government stepped up to the plate, cutting taxes on smaller, more fuel-efficient vehicles to 5% and providing subsidies. And, as part of the country's $586 billion stimulus package, the Chinese government dedicated a nice chunk of change to improving roadways and traffic monitoring systems.

These actions alone spurred incredible demand for vehicles throughout China. In the first seven months of 2009, car sales in China exceeded seven million. That represents a whopping 23% increase over last year!

What's even better is that China's passenger-car sales in August jumped 90%, while overall vehicle sales increased 82%, or 1.14 million units. And for September, it is projected that China's vehicle sales could exceed 1.2 million units.

Given the rising demand for vehicles throughout China -- rural and urban areas -- the country is now projecting that vehicle sales could clock in at 12.6 million units in 2009. So there's no denying that China's auto industry has truly stepped into the spotlight this year.

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