Car sales speed up in China

Carmakers are struggling to meet demand as the country overtook the US as world's largest auto market last year

A salesman attending to customers at an auto market in Beijing. About 99.7 per cent of cars made in China through November last year were sold, says the China Association of Automobile Manufacturers. -- PHOTO: AP

Beijing - Nissan's factory in central China is making cars almost 24 hours a day, yet Ms Pan Xiaowei still waited three months for her new Tiida compact to arrive at the dealership.

'It wasn't like this a couple of years ago,' said Ms Pan, 34, whose husband runs a property development company in Shandong province. 'We used to buy and get a car straight away, and now you have to pre-order and wait.'

China overtook the United States last year as the world's largest automobile market with sales surging 46 per cent to 13.6 million, according to the China Association of Automobile Manufacturers.

Nissan, Ford and Honda are running their Chinese factories at full capacity, with overtime and weekend shifts, and still cannot deliver enough cars.

'Based on our current growth rate and planning assumptions, the capacity of our two facilities will not be able to accommodate the expected future demand for our products,' Mr Nigel Harris, general manager of Ford's venture with Chongqing Changan Automobile Co, said in an e-mail.

About 99.7 per cent of cars made in China through November last year were sold, the association said. Foreign automakers are expanding assembly lines as buyers in secondary cities beyond Beijing and Shanghai benefit from government subsidies of at least five billion yuan (S$1 billion), a sales tax cut and 8.9 per cent economic growth.

Car sales have been fuelled by demand in rural areas where the growth rate exceeded that of urban regions last year for the first time, trade minister Chen Deming said in an interview on Wednesday with state broadcaster CCTV.

'Spending power in the medium-sized and small cities is rising, and demand there has surpassed those in bigger cities,' said Mr Wei Tuo, a Henan province dealer for Nissan's joint venture with Wuhan-based Dongfeng Motor Group. 'Cars are no longer considered a luxury item but a standard consumer product.'

Mr Wei's company has about 40 outlets in the central region selling several brands. About 55 per cent to 60 per cent of sales come from middle-sized and small cities, he said.

Nissan is the No. 1 Japanese automaker in China, with last year's sales rising 39 per cent to 756,000, outselling Toyota and Honda, according to the three companies. Nissan's top seller is the Teana.

Nissan is spending five billion yuan to expand its Hubei province plant to build up to 600,000 vehicles annually from the current 430,000, spokesman Kana Minamidate said. That central China factory makes the Tiida compact and Livina series which are popular in secondary markets, she said.

'The plant was originally operating with two shifts but now we have three shifts to build cars almost 24 hours a day,' Ms Minamidate said, adding that customers still wait for deliveries.

Near-term growth will be concentrated in eastern and central regions, and cities outside Beijing, Guangzhou, Shanghai and Shenzhen, Ford's Mr Harris said. The venture opened more than 65 per cent of its new dealerships last year in smaller cities, and that proportion is expected to reach 75 per cent in the next few years.

Honda, which opened 55 dealerships mostly in small cities last year, is focusing expansion in suburbs of major cities, said Mr Masayuki Igarashi, general manager of its China operations office in Tokyo. Its best-selling model is the Accord.

Bloomberg

Source: Straits Times, 17 Jan 2010.