Car Sales In China Versus US Auto Sales Considered
Recently, the Q2 2012 auto sales data came out in the US, and it was quite excellent, good growth, and very good for the American worker as well as an industry which got totally hammered in the recession of 2008. That’s a good thing, and interestingly enough, in China it turned out to be just the opposite, as car sales had slowed. How can that be you ask? After all, the US economy is barely cruising along at 1% growth, and although China has slowed significantly, it’s still pushing 6-7% growth depending on whose economic figures you use. Okay let’s talk about all this for a moment.
You see the Chinese middle class has grown to nearly 460 million, and they consider middle class to be an income of $1500 per year. No, that’s not very high, but things are cheaper there to remember. The average car runs about $4,000 so many Chinese families can now afford one, so why aren’t they buying? Well, consider this the Chinese are big savers, and they are not too much into borrowing money, so they pay cash for their automobiles. Also, China used to have a tax credit on a road tax fees which are charged to new car buyers, they’ve done away with that. Why you ask?
Well, because there are too many cars on the road, too much traffic congestion, and in the city there’s no place to park – gee whiz sound familiar. China needs more roads before it makes more cars China’s silk road economic belt. There was an interesting article on that last tidbit of information in Bloomberg BusinessWeek on July 16, 2012, the article was titled; “China applies the brakes on car sales.” Now then, here’s another question for you; how long will it be before Chinese cars start becoming available here in the United States?
The first dealerships are going to go in quite soon, and Chinese consumer banks will be allowed to operate in our country as well. If they are able to sell their cars here cheap, as in between 10,000 and $15,000, they will sell millions of cars to Americans, albeit very small ones with not very many options, and they will be able to finance them as well. This will be tough on US automakers, at a time when our automakers were hoping to make more inroads in China selling our American-built cars, which they consider to be a luxury item in their country – and if you look at the difference – well, they are.
Meanwhile, Ford is getting hurt in the European Union due to the economic crisis there, and although sales are good here, that will take its toll on their revenue. General Motors which is big in China will not be able to expand or expect the type of revenue growth gains that they have in the past in China, at least not this year and or the next, although GM is doing quite well in the United States also.
It will be interesting to see what happens in the remainder of 2012, but this is a pretty good indication of what’s going on with global auto sales. Indeed I hope you will please consider all this and think on it.