2011 May Be a Big Year for Foreign Automakers in China

December 18th, 2010
in News, Background

China Daily:  Overseas automakers including GM, Ford Motor Co and Nissan Motor Co should benefit next year if the Chinese government ends a rebate that favors domestic manufacturers as expected by Dec 31, said Bill Russo, a Beijing-based senior adviser at Booz & Co. 

Follow up:

The subsidy, which cuts the tax from 10 percent of the purchase price to 7.5 percent, applies only to cars with engines of 1.6 liters or smaller, a segment of the market dominated by Chinese models.  Local brands accounted for more than 63 percent of the new models with that size engine last year, according to the China Association of Automobile Manufacturers.

"The game that has been played with incentives is to try to keep consumers, especially first-time consumers, interested in purchasing those locally branded cars," Russo said. "To phase out the subsidies is more challenging for local companies than for foreign ones."

Rising incomes also should prompt car shoppers to buy more foreign models in the world's largest auto market, Russo said. China's per capita income of $3,744 last year was more than double the 2005 amount, according to the World Bank.

Total vehicle sales may reach a record 20 million next year, Russo said, an 11 percent increase from the manufacturers association projection of 18 million this year. Total sales are up 34 percent through November over a year earlier, and passenger-car sales rose 35 percent in the same period.

GEI Editor's note:  China recently surpassed the U.S. as the world's largest auto market, partly because of the decline in U.S. auto sales resulting from The Great recession.  However, 20 million sales in China would far exceed the record auto sales in the U.S. of 17.4 million in 2005.

Pictured below is Beijing traffic before the projected 2011 auto makers' boom in China.

Beijing traffic

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