Chinese Food (for Thought)
I wrote last July that the future of the auto finance sector was largely wrapped up in China. August car sale numbers in the Middle Kingdom — while supplemented by government stimulus (their government, not ours) — showed why China is the most important car-buying market in the world today.
According to Bloomberg:
China’s passenger-car sales surged a record 90% last month, as tax cuts and government subsidies spurred demand, bringing the nation closer to overtaking the U.S. as the world’s largest auto market.
Sales of cars, sport-utility vehicles and multipurpose vehicles, rose to 858,300, the China Association of Automobile Manufacturers said in a statement today.
Is this really such great news, though? This next forecast will take you back to 2005:
Full-year vehicle sales may rise 28%, based on a forecast made by Chen Bin, chief director of the industry coordination department at the National Development and Reform Commission, at a conference in Tianjin on Sept. 5.
He added that carmakers should “keep their heads” to prevent overcapacity as it was unclear whether growth was sustainable in the longer term.
In the first eight months, China’s vehicle sales rose 29% to 8.33 million. Passenger-car sales rose 37% to 6.22 million. Commercial-vehicle sales gained 11% to 2.1 million.
Ah, the joys of incentive-fueled rocketing car sales.
So there is a caveat to China’s story: China is the key to the future of the world’s auto industry, as long as China’s auto sector can “keep its head.” An important caveat, indeed.
