As China car market matures sales slow amid tougher competition | Business| Economy and finance news from a German perspective | DW | 23.04.2012
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As China car market matures sales slow amid tougher competition

In the past decade China has become the world's biggest car market reporting annual double-digit growth. As the government stops subsidies, automakers are finding it harder to lure increasingly car-savvy customers.

After a decade of massive growth, China's car sales are set to weaken this year, falling off to an average of 7 to 8 percent, industry analysts said on the sidelines of the Beijing Auto Show, which opened on Monday.

"There are more brands and more products in China than ever before, and that's making market conditions suddenly more competitive and tough for everyone," Li Shufu, chairman of Zhejiang Geely Holding Group told Reuters news agency.

China's car sector stalled already in 2011, posting growth of just 5 percent after record expansion of 46 percent in 2009 which saw the Asian country emerge as the world's biggest car market.

The slowdown was a result of a government cutback of car purchasing incentives, and driving restrictions imposed by some Chinese cities to curb pollution and congestion.

In addition, competition is heating up as new competitors, like Seat and Alfa Romeo, enter the market, and more Chinese-made cars are being produced in foreign joint ventures as a condition for Western auto firms to be allowed to produce in the country.

Chinese tastes

According to market analyst Axel Krieger, a car was the most important "status symbol" for Chinese customers.

"They put great emphasis on individual prestige, and have an almost childlike desire to show off their new wealth in public," the analyst with Mc Kinsey consultancy firm told Reuters news agency.

In the past, China was a market for "more basic forms" of cars, said Kevin Wale, which had now changed to a growing "personalization," resulting in rising sales of so-called sports utility vehicles (SUV) and luxury cars.

"Every trend that has been in the auto world is starting to come to China," the head of General Motors' China operations told Reuters in Beijing.

Foreign brands still dominate China where about 100 million cars are owned by the 1.4 billion Chinese at the moment.

By comparison, 82 million Germans own about 43 million cars, meaning that car density in China is equivalent to those of Germany in the 1950s.

However, even according to conservative estimates, car sales in China are expected to surge to at least 30 million new vehicles every year by 2020 – up from 18 million new cars bought by Chinese last year.

uhe/gb (dpa, Reuters)