SHANGHAI AUTO SHOW: China to eclipse 20 million new-vehicle sales

Growth has slowed, but world's biggest car market still setting records

The juggernaut that is the Chinese motor industry is predicted to set yet another record and pass 20 million new-vehicle sales this year -- even though growth has slowed.

After 10 phenomenal years -- from 2.5 million sales in 2001 to 18.3 million sales in 2010, an increase of more than 600 per cent -- new-car figures are up by only 8 per cent in the first three months of this year.

But the boss of General Motors in China, ex-pat Australian Kevin Wale, believes the country will be the first in the world to eclipse 20 million sales in one calendar year.

"It's still growing at about 8 per cent, which under any circumstances most people would think would be terrific," Wale told the Cars games ales Network at Auto Shanghai earlier this week.

If the Chinese market continues its current rate of growth, an 8 per cent increase would deliver an annual tally of 19.7 million, just shy of the 20 million mark.

But Wale's counterpart at Korean car maker Hyundai, Jae-man Noh, believes growth will lift to 15 per cent this year, in line with the Chinese Government's forecast -- and that the 30 million sales barrier will be broken by 2020.

"Mr Noh agrees with those forecasts," his interpreter said during a roundtable interview at Auto Shanghai yesterday. "In line with these forecasts [Hyundai] plans to increase its supply."

Hyundai broke ground on a new factory site last December; its third factory in Beijing, due to be completed by mid 2012, will give Hyundai alone an annual production capacity of 1 million vehicles -- equivalent to the entire Australian new-car market shared by 46 brands.
Wale said the Chinese market was so strong that growth would likely remain at "10 to 15 per cent for the next few years".

"There's still very strong underlying demand for the vehicles, good economic growth, a desire to increase consumption, increasing urbanization, low vehicle ownership, the fundamentals are there," he said. "Unless you get a major external shock I think it will continue to grow."

He said the recent reduction in government support for rural buyers and vehicles with small engines "had a pretty significant impact" on sales, but there was still plenty of demand.

"There are still people who want cars," Wale said. "I'm confident the market is still going to be pretty solid.

"The rest of the world tries to predict the future with pinpoint accuracy but we just don't bother. Whether growth is going to be ... 6 or 15 percent, it doesn't matter. Underneath, demand is solid."

When asked if General Motors regretted not investing more in China earlier, he said: "Whenever you're trailing a galloping, out-of-control horse you're always behind."

He said even if companies had over-invested by building new factories and networks they wouldn't be exposed for long.

"There's so much demand out there," he said. "If you get ahead of the game you'll have excess capacity for a couple of years, that's it. It's not like the market is declining, economic growth is still going to be solid.
You're not investing only for the future, you're actually ... getting good return on your money."

He said the Cruze sedan was a good example. "We do about 170,000 units a year. You're getting relatively quick returns on your investment. You're not ... having to wait for 10 years to have the market turn up.

"I think if you had it all over again you'd probably double down. You're thinking 'I should have gone harder'. You couldn't, but that's what you would've been saying."

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