China Automobile Market Information
China – A Market with Great Opportunities and Unlimited Potential
“No one wants to miss an opportunity to catch Chinese eyes, because no one can ignore the tremendous potential of the Chinese market.”
Vehicle Output & Sales
China’s vehicle output in 2001 is 2 million and the number has reached 7.28 million in 2006, among which car and mini car grow the fastest. From this year, China overtakes German and leaps to the top 3rd automotive sales market of the world.
According to authoritative statistics, till the end of 2005 population of domestic civil-use vehicles is 31.6 million in which 18.52 million is privately-owned and this number even grow to 22 million by the end of 2006. Predicted by China Automobile Industry Association, domestic vehicle output in 2007 is expected to reach 8.5 million, increasing by about 20% comparing to the same period of last year.
Disclosed by China Automobile Industry Association, volume of domestic vehicle production and sale in 2006 is respectively 7.28 million and 7.22 million among which 80% is purchased by personal consumers, indicating that personal consumption has become the main force of car market. It is predicted that in 2007 volume of domestic vehicle sale will surpass 8 million by a 15% growing rate.
According to the latest statistics of China Automobile Dealer Association, in 2006 domestic trade volume of second-hand vehicles reached 1.9 million, equal to 26.4% of new vehicles sale volume of the same year. Among them 819,300 are cars, increasing by 54.11% comparing to the same period of last year.
Highway Construction:
Data from the Ministry of Communications, P.R.China shows that by the end of 2005, the total mileage of domestic roads open to traffic has reached 1.93 million km, among which 0.41 million km are highways. By the end of 2006, the total mileage grew to 3.48 million km and 0.45 million km are highways. In addition, it is predicted that till 2010 passenger carrying capacity of road system will reach 24 billion persons/times and cargo carrying capacity will reach 16 billion tons.
Continued expansion of expressways led to increases in highway trucking, and that increase was reflected in the production of heavy-duty trucks, a sector which grew by 60%. Both production and sales of light trucks were up by over 40%, especially for inexpensive light trucks and pick-up trucks.
The investment for the construction of highway has increased enormously from 2000 owing to Chinese government attaches more importance to it. Improving infrastructure has facilitated the increased use of automobiles. The government is adding about 3,000 km of expressways a year to the existing network. China now has already built over 40,000km network of highways, the second largest in the world. City governments are providing more parking spaces to cope with the increased volume.
US$4.25 billion were invested in the infrastructure of Beijing in 2004, and furthermore US$22 billion will be invested before 2008 OLIMPIC to improve the traffic status of Beijing, declared by Beijing Municipal Government.
Auto Aftermarket Sector Research:
Data shows that by the end of 2005 Chinese vehicle population has overfilled 35 million among which 18 million are privately owned cars and 60% of them are new cars within 4 years old. Professional indicates that till 1996 Italian vehicle population is 21 million and its total value of aftermarket service output is US$41 billion. Calculating on this basis and combining domestic consumption circumstance, 2007 market volume of domestic aftermarket service will reach to US$25.97 billion. However, the present value of aftermarket service output is less than US$15.58 billion. Generally, the demand for aftermarket service is hugest for 4-9 years old vehicles, meaning that from 2007 domestic market demand will grow dramatically and even reach up to US$38.5 billion.
China is set to become the world’s second largest new automobile growth market by the end of 2006 and this growth is spurring demand for U.S. automotive parts, services and aftercare products. The East China region in particular has tremendous opportunities as new car drivers become more sophisticated and demand better vehicle quality and better repair and maintenance service.
Affecting by the price reducing of vehicles, the profit of auto parts and accessories industry will fall in 2005, the first time for the past decade. This situation caused the auto-makers pay more attention on aftermarket sector.
It is still in the opening stage for domestic auto aftermarket sector, said Zhang Boshun, the secretary-general of the Trade Committee of China Automotive Industry Association. With reference to the general ratio of 1:1.5 for vehicle production vs. aftermarket products, China’s aftermarket sector is far to match with the development of vehicle market. Aftermarket sector will become the second barrel gold of automobile value chain.
According to analyzing of BIBO Consultant, by the end of 2005 China’s auto aftermarket scale will reach US$ 11.83 billion. NEW BEIJING reported that till the first half of 2004 the demand capacity of this market has reached over US$9.76 billion. According to an estimate by market researched Roland Berger, China’s aftermarket scale is expected to reach US$23.17 billion in 2010, the second largest in Asia after Japan.
Starting from 1990s, some well-known MNE set up JV factories in China for the production of auto part and accessories. Turning into OEM necessary suppliers, they began to expand business to aftermarket industry. The best known among these MNE are BOSCH, TRW, DENSO, VALEO, FEDERALMOGUL, SACHS, HELLA etc.
Maintenance and Repair Equipment:
The 30 million populations of vehicles in China results in US$25.97 billion market capacity for aftermarket service, among them the sales volume of maintenance and repair sector has surpassed US$0.77 billion
With automotive maintenance and repair manufacturing as its emerging industry, Yinkou has now grown to be the biggest and most important manufacturing basis of this industry in China. Till now there are 78 entities engaged in this industry supplying over 150 kinds of various products,including tire changer, tire balancer, lift, 4 wheel alignment, spanner, etc,. With US$31.2 million output value, the assortment of products covers 90% of the all the domestic maintenance and repair products and also 90% of domestic markets. 24 among the 78 Yinkou entities participated in Auto Maintexpo China 2007 and benefited a lot from the exhibition.
According to the statistic of the Ministry of Communication there are nearly 300,000 maintenance and repairing entities, and the number is expected to grow at 10-15% rate annually in the coming years. The annual output value of this industry will surpass US$4.9 billion with 400,000 the employed.
Among the 300,000 maintenance and repairing entities, only 10% can supply all kinds of maintenance and service including heavy repair, 55,000 entities mainly manage the daily maintenance, and the others provide quick- repairing for certain items.
The number exposes the shortage of maintenance and service entities which are required to be 13 per 1,000 vehicles but the recent number is only 2.8. The above information also indicates that the technology level among different entities varies a lot and the low-end ones are still the majority.
As domestic production cannot satisfy the increasing demand, there exists a huge market for imported maintenance and repair equipment. From a recent investigation against the equipment purchasing by the maintenance and repair entities, the number of foreign-made equipment is beyond 50%, and the proportion is even up to 80% for the large and medium-sized entities.
Auto Electronic Industry
With the development of global digital and electronic technology, testing instrument has become more and more important and popular at present years. Showed by Frost & Sullivan report, the global market capacity of testing and measuring instruments will reach US$5.41 billion. In China, the oscilloscope occupied less than 5% and decoder less than 30% of the market in 2003. However, in the first quarter of 2007 two types of oscilloscope are ranked the top 2 among the published list of 10 popular testing instruments.
According to statistics of CCID, the growing speed of domestic automotive electronic industry remains a 35% rate in recent years. Output of domestic electronic products reaches 54 million sets up to US$10 billion which number was only US$4 billion in 2003. 2007 will see the peak period of development of domestic automotive electronic industry.It is predicted that the market capacity for auto-us electronic products will reach US$18.4 in China in 2009 and US$185.3 in the world in 2012.
Starting from 2000 some overseas magnates began to set up garage workshops in China mainland. Jintao Group, the magnate of Hong Kong imported cars and repair industry, just set up a repair center in China mainland. Mainly supplying services to imported vehicles such as Benz, Toyota, the center is equipped with the top electronic repair equipment worth millions of US dollars as well as the most experienced technicians.
Paint for Auto Use:
It is predicted that till 2010 China vehicle population will be 56 million and the production in 2010 will be 6 million. That means the demand of 300,000 tons of paint, among which paint for new vehicles and repairing are separately 220,000 and 80,000 tons. There exists a huge developing space for automotive repair coating market.
As the necessary equipment for the maintenance and service entities, the recent available spray booths manufactured by about 200 domestic enterprises are far to satisfy the increasing market demand.
Lubricant Oil for Auto Use:
China has become the second largest consumer of auto lubricant after the U.S. According to the authoritative data, the consumption of lubricant in 2004 exceeded 4 million tons with the sales revenue of over US$3.66 billion. In 2005, US$1.09 billion is estimated only for the car care consumption. With the popularity of privately-owned cars, Lubricant, previously the industrial products, has become the household necessities and is put at the shelves of supermarkets.
Tire:
China’s production of passenger and heavy-duty tires will reach 100 million pieces in 2020, with a rubber consumption of 7.5 million tons, taking up 35% - 40% of the international total.
According to statistics, 40% of the expressway traffic accidents were caused by tire-blowout which is mainly because of tire worn and torn. At present time, tire dynamic equilibrium is the emphasis for tire test in the testing stations and repair shops. However, the test for tire worn and torn in China now only depends on range estimation. It is in urgent need for advanced foreign technology and new equipment for tire test.
Car Washing Machine:
Already there are thousands of computerized car washing machines in China now, and the number is growing violently from 15%-20% annually, tending from traditional products towards the latest no-water washing machines. Beijing ranks the top occupying 25% of the total number of car washing machines.
Automotive Supplies:
In 2005 the scale of domestic auto parts market was about US$75.3 billion, in which car necessaries market was US$47.7 billion and after-sale market was US$12.3 billion with export amounted to US$15.6 billion.
Before 2007, the world automotive magnates will purchase auto parts equal to US$50 billion from the low-cost regions among which 70% will be from China. It is predicted that till 2010 the global automotive products trade volume will reach US$1200 billion.
Positive trends will present as the following for the automotive supplies consumption in 2005.
- Automotive securities equipment is in increasing demand. TPMS started to appear in the market in 2004 and in 2005 it is popular ware among automotive securities products.
- The market is brisk for automotive acoustic equipment, especially for the sound equipment refit, mobile DVD, CD and MP3.
- Automotive beautifying industry is upgrading and become more professional. The market is booming and expanding, in great demand of good quality and high class products.
- Demand for automotive navigation and burglar-proof devices market is also growing.
Automotive service industry:
Authoritative report disclosed that among domestic vehicle sales revenue the proportion of auto making is still on the high side while the after-sale service is on the low side. Looking from the overseas market situation, after-sale service revenue is the most stable profit source of the automotive industry value chain.Comparing with the overseas market profit proportion for which the highest has reached 70%, the 40% profit proportions of Chinese auto after-sale service revenue is merely in the opening stage and there exists great potential for developing.
Government Support:
In some economic-developed regions of China, the local government now devotes major efforts to developing auto service industry including maintenance and repair. The auto-makers are encouraged to make profit from the service industry.
Analysis of present situation of service industry:
Although the maintenance industry is developing rapidly, the technology level is still low representing in the following sectors:
- Domestic products are unstable in function, with frequent breakdowns and inferior appearance.
- Mechanized and semi-mechanized equipment is still the majority.
- Most of the maintenance and repair entities are merely equipped with machines and tools, lack of electronic and computerized test and diagnostic equipment.
- The domestic enterprises are short of awareness in the quality control and effective management towards the development and manufacturing of products as well as the after-sale training, service and warranty. Generally speaking, the domestic entities still cannot match the foreign suppliers at present time.
- It is a common situation for the entities that are short of qualified professional technicians for vehicle diagnostic.
Environmental Protection Issues
With the high-speed development of the economy of our country, the liquefied petroleum gas (LPG) of our country increased fast with consumption rate of increase of 18% every year in the past 10 years, its production, had sold and stored and transported and already formed an enormous industry. At present, there are only about 300,000 gas-powered vehicles in China, including those burning liquefied petroleum gas (LPG) and compressed natural gas (CNG).
The Chinese government is expected to soon launch a programme to research and promote the use of liquefied natural gas (LNG) as a vehicle fuel as it attempts to address the soaring number of cars clogging its roads and air pollution clouding its skies.
China is preparing to draft relevant standards equivalent of the Euro Ⅲ standards. Gasoline will remain a major form of fuel in China for a long time to come and improving fuel quality to help vehicles satisfy Euro Ⅲ emission standards is of utmost important task facing China.
China encourages the development of clean and fuel efficient vehicles in an effort to sustain continued growth of the country’s automobile industry. By the end of 2005, China plans to reduce the average fuel consumption per 100 km of all types of vehicles by 10%. The proportion of vehicles burning alternative fuel will be increased to help optimize the country’s energy consumption. Priority will be given to facilitating the research and development of electric and hybrid vehicles as well as alternative fuel vehicles, especially CNG/LNG.
