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Boom in China?s Auto Sector
Nov 05, 2007

The auto sector in China showed decent growth, even after increased competition was brought in the field due to price cuts by foreign joint ventures.

In the month of September 2007, the vehicles manufactured in China increased its market share to 26% points, a hike of 4% points. The share increased even after the foreign joint ventures’ price cuts brought heated competition in China, according to the news published by China.

There was 24% rise in the sale of passenger vehicles in China in Q1 of 2007. During January-September 2007, the modest growth in the car industry increased the country’s carmakers sales from 24.46% YOY to 6.46 Million units. The output was up 22.78% at around 6.51 Million. This was reported by Xinhua news agency.

The China Association of Automobile Manufacturers disclosed that the sales of the passenger cars, including SUVs (Sport-Utility Vehicles) and MPVs (Multi-Purpose Vehicles), increased 22.4% reaching 561,000 units.

The surprising growth was seen after some foreign carmakers announced discounts on the mainstream models addressing the price advantage of the homegrown cars in China in September 2007. Some of these carmakers were PSA Peugeot-Citroen, Honda Motor of Japan and Hyundai Motor Corporation of South Korea.

The country’s car industry’s growth is also pushed by the foreign investments. The credit for the increasing number of foreign investors in the country’s auto sector should go to the Chinese auto producers’ policy. It is necessary for a foreign investor to collaborate with a domestic company in China and own not more than 50% of share in the domestic company.  Also, it has to partner with a Chinese company.

Besides the government’s regulatory and financial backings, the Chinese automobile industry’s growth is pushed by the country’s booming economy as well as increasing income. Many high-speed technologies and new models are also attracting the tech-savvy Chinese youth. In addition to that, the highway infrastructure is also showing growth in China, helping to increase the number of car-owners in China.

A Senior Research Analyst at RNCOS said, “The auto industry of China is the world’s fastest growing industry, and is the world’s largest auto market after United States. The auto dealers are confident and happy at the decent growth in the industry. Car, symbolizing high status and freedom, is changing the country. But this change has some drawbacks, like the increase in traffic and rising air pollution. Therefore, the auto makers should develop vehicles that are more environmentally-friendly”.

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