Snapshot of China’s Auto Market

25 May 2007

China’s medium- and large-scale passenger cars and heavy-duty trucks will maintain fast sales growth, according to a recently published report by CCID Consulting, a China-based market research and consulting firm.

In 2006, China’s vehicle output and sales volume reached 7.28 million and 7.215 million units, respectively, up by 27.3% and 25.1% year-on-year. This made China the world’s third country to pass the 7-million unit threshold, the others being the US and Japan.

Passenger vehicle sales reached 5.176 million units, up by 30% year-on-year. Total sales included 3.829 million standard passenger vehicles (cars), up by 36.9% year-on-year; 238,000 SUVs, up by 21.2% year-on-year; and 191,000 MPVs were sold, up by 22.6% year-on-year.

In 2006, 2.04 million commercial vehicles were sold, up by 14.23% year-on-year, accounting for 28.3% of the total vehicle sales volume. More than 300,000 heavy trucks were sold, up by 29.9% year-on-year. Of this, semi-trailer tractor sales grew by 64.2%. Light truck sales were up by 100,000 units, accounting for 39.58%. Dongfeng Group, FAW and China National Heavy Duty Truck Group accounted for 62.8% of the heavy truck market.

China’s auto parts industry is gaining a growing position in the auto industry, with an improved level of manufacturing. However, auto parts only account for some 35% of the total revenues and some 40% of the profits in China’s auto industry, notably lower than the international average of 60%-70%. This implies that there is still a very big room for China's auto parts industry to grow in the future, according to the report.

In 2006, profit growth in the auto industry fell month by month. While output and sales both hit a new record high, industry profits failed to also reach a historical high. Passenger vehicles, cars in particular, now account for more than half of the total products.

Cars’s inherent characteristic of “small profits but quick turnover” determines that expanded scale can only stabilize the absolute value of profits but have difficulty in raising profitability. By comparison, business vehicles— medium- and large- sized passenger cars in particular—have “high added values”. Though their output and sales grow not as fast as cars, their earning power is far greater than that of passenger vehicles such as cars.

—CCID Consulting