Chinese Car Sales (and Oil Consumption) Revving Up Again

12 July 2005

Reuters. June passenger car sales in China, the world’s third-largest vehicle market, jumped by nearly half to 375,500 units from a year earlier, according to the China Association of Automobile Manufacturers (CAAM).

For the first six months of 2005, car sales increased 10.6% to 1.843 million units, at the lower end of the forecast range of 10%–15%. Growth in car sales had slowed in 2004 to 15% following almost doubling in 2003. The June increase points to a resumption in growth momentum in this important market.

The Customs General Administration in China reports that the country imported 63.42 million tons of crude oil in the first half of 2005, a year-on-year increase of 3.9%, although the cost for that oil rose 42.2% year-on-year to US$ 15.169 billion. (People’s Daily.)

China first became a net oil importer in 1993. By 2003, imports exceeded 100 million tons per year, or 36.1% of consumption. Last year, China imported more than 150 million tons of crude oil and oil products, or more than 40% of consumption.

China is not alone in Asia in seeing strong growth. Thailand’s new vehicle sales in June rose 25.6% from a year ago to 63,421 units—the strongest monthly growth so far this year. (Dow Jones) But one of the key attributes of the Chinese situation is, of course, the magnitude, both in the base and in the upside potential.

It is increasingly critical that China lead, not lag, in developing and implementing more sustainable solutions for transportation. Yet while there is much effort being put into clean, alternatively fueled-public transportation, electric vehicles and hybrid development, there is also the growing popularity and strong sales of SUVs in Asia to consider.

Shanghai Automotive Industry Co. (SAIC), one of China’s largest automakers, has nudged up its percentage ownership of South Korea’s SsangYong Motor—best known for its SUVs—to 50.91%. During the initial major acquisition in January 2005, SAIC’s stake was a less-than majority 48.92%.

SsangYong Kyron

At the time of the acquisition, SsangYong Chief Executive So Jin-kwan stated that his company will concentrate on developing “environmentally friendly engines”, with a diesel-hybrid engine possible.

With SsangYong’s newest SUV—the Kyron—heading for the Chinese market, the company needs to fulfill that pledge.