China passenger car vehicle market ‘to continue upward trend’

While some market analysts are pointing to the end of the 20 per cent annual growth “dream” attached to the seemingly perpetually growing Chinese domestic passenger car vehicle market, others point to the continuance of an “upward trend”. A new analysis of the automotive market in China produced by HIS should be counted amongst the optimists and suggests “significant growth opportunity continue in many of the country’s provinces, however, some provinces will start to see growth rates change significantly”. According to IHS Automotive forecasts, passenger vehicle volumes in the country as a whole are expected to rise more than 10 million units by 2026. And thus the detail is not as far apart from the opposing thoughts as it may first seem.

The forecast is said to be the first of its kind in the industry and includes passenger vehicle demand for 31 provinces in China, which is important when you consider the scale of People’s Republic. “If we think of China as 31 separate countries, 19 of the 20 fastest growing passenger vehicle markets in the world since 2002 are in China,” according to Henner Lehne, global head of light vehicle forecasting for IHS Automotive. “Our new forecast seeks to provide insight and guidance, inform key business decisions and investment, and offers a level of forward-looking intelligence on the market in China that has been unavailable up to now.”

Beijing, Shanghai expected to slow while other provinces grow exponentially

Results of the analysis show that the widely held view of China – namely that Eastern Coastal areas, approaching saturation, will be offset by growth to the West – is overly simplistic with more complex local dynamics likely to play out.

For example, while Beijing and Shanghai have been thought to have seen new passenger registrations peak (based on government regulations and license plate restrictions), IHS Automotive analysis shows some remaining medium-term sales growth prospects still remain there.

The complexity of market drivers in the Chinese market right now can been seen in recent data out of Guangdong province, one of the largest and more mature provinces, which is seeing car sales growth rivalling the strongest car markets in the world and growing at more than twice the China national average — and faster than the majority of Central and Western provinces.

The real market opportunities for automakers come from other parts of China as many provinces will experience a substantial shift in affordability, personal mobility needs, and vehicle development and production capacity improvements between now and 2026.

As an example, Shandong, in eastern China, is currently the ninth largest market for passenger vehicles globally, now larger than Italy or South Korea, with additional growth expected. Also in the east, Fujian province was the 66th largest passenger vehicle market globally in 2002, but ranks 36th today, larger than Norway, Peru and Israel combined. And Qinghai province, which ranked as the 116th largest market in 2002, is ranked 80th today, larger than the automotive markets in Romania or Vietnam.

IHS Automotive also has identified some provinces that will achieve a significant slowdown in sales by the middle of the next decade. Shandong, for example, was averaging double digit growth in passenger sales for many years, however this rate is expected to fall dramatically and average below 5 per cent growth by 2026.

The forecast also outlines risks for early market saturation for some provinces but highlights great opportunities for other provinces for many years to come. Beijing Province, as an example, has had tremendous increases in vehicle sales in recent years. However, due to congestion, government policies and market maturity, vehicle sales will likely begin to fall within a few years at a modest, consistent pace from the levels they are at today. While on the other hand, Qinghai, a relatively small vehicle market today, will nearly double in size over the forecast horizon, and will likely continue to grow into the 2030s.