The challenge in predicting China's market demand
By: Wayne Xing
2010-06-27
The monthly growth rate of China's automobile market in the first five months has continued to decline, especially that of passenger vehicles.
According to available output and sales data for June, such a trend continues and may very well run through the three summer months of 2010.
To our surprise, however, a recent forecast conducted for a client indicates that total demand for automobiles in 2010 is expected to reach well beyond 17 million units and for passenger vehicles over 13 million. Such a forecast is the result of taking full consideration of the declining trend in 2010 as well as historical data over the last seven years.
And the forecast was confirmed by two leading auto analysts in China: Rao Da, secretary-general of National Passenger Vehicle Association, and Xu Changming, director of Economic Research under the State Information Center.
Both Rao and Xu in a telephone conversation hastened to add, however, that market demand in the 2nd half of the year may be affected by possible policy factors from the central government.
Government macro economic policies have been the most unpredictable factors that make automotive forecasting in China almost impossible. Just two years ago, industry consensus here was that China would be approaching the U.S. market in total new vehicle demand by 2015 at 17 million. Nobody had expected that China would become the world's largest automobile manufacturing country in 2009 and reach 17 million five years ahead of prediction.
In fact, the explosive growth of the market in 2009 and 2010 may have shortened previous forecast of market demand by 10 years. Five or six years ago, the State Councils' Development and Research Center predicted that China's annual demand may reach 21.8 million by 2020 and 32.4 million by 2030.
Even with the most conservative perspective, CBU's recent long-term forecast of 2020 indicates a market demand exceeding 30 million.
The number may look incredible and pose tremendous challenges to the country in energy resources, environmental protection and urban transportation solutions. But nobody can deny such a potential because 30 million in annual sales by 2020 translates into a vehicle parc of about 250 million and a per-capita ownership of less than 200 per 1,000 people.