China Car Market to Extend Gains Over U.S., Automakers Say

Auto sales in China may outstrip the U.S. for a third consecutive year in 2011 as the world’s largest carmakers Toyota Motor Corp., General Motors Co. and Volkswagen AG estimate sales will grow by as much as 15 percent.

GM, the biggest foreign automaker in China, expects sales to grow as much as 15 percent in line the with the wider market, China President Kevin Wale said yesterday, while Volkswagen, Europe’s largest carmaker, projects China’s markets will rise 10 to 15 percent, according to Soh Weiming, the company’s local executive president.

“I would anticipate nothing less than that and we will grow together with the market,” Soh said in an interview at an auto conference in Guangzhou, China yesterday. VW’s growth would be limited by a shortage of capacity, he said.

Sales growth in China may outstrip the U.S. again in 2011 even as the Asian nation’s government is set to end incentives this month that helped boost its auto sales by 34 percent to 16.4 million through November. Next year, auto sales in China may reach 20 million in China, according to Booz & Co. and Nomura Holdings Inc. analysts, while light-vehicle sales in the U.S. may be as much as 12.8 million units, said Ashvin Chotai, managing director of Intelligence Asia Automotive, a consultant.

Photographer: Natalie Behring/Bloomberg

Auto sales in China may outstrip the U.S. for a third consecutive year in 2011 as the world’s largest carmakers Toyota Motor Corp., General Motors Co. and Volkswagen AG estimate sales will grow by as much as 15 percent. Close

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Photographer: Natalie Behring/Bloomberg

Auto sales in China may outstrip the U.S. for a third consecutive year in 2011 as the world’s largest carmakers Toyota Motor Corp., General Motors Co. and Volkswagen AG estimate sales will grow by as much as 15 percent.

Chinese passenger-car vehicle sales, which exclude trucks and buses, reached 12.45 million through November this year.

Toyota

Toyota, the world’s largest automaker, said yesterday it expects its China sales to rise 13 percent to 900,000 vehicles in 2011. Nissan Motor Co. projects its sales will rise 17 percent to 772,000 units.

Even as China extends its lead over the U.S. and other markets, the end of subsidies and insufficient capacity are slowing the pace of growth.

GM and its joint ventures sold 2.2 million vehicles in China in the first 11 months of this year, an increase of 33 percent from a year earlier, the company said this month. VW- owned brands sold 1.8 million vehicles in China through November, an increase of 38 percent from a year earlier.

VW’s Soh said yesterday that a lack of capacity would cap the Wolfsburg, Germany-based automaker’s growth in China over the next two years. To meet demand in the nation, VW has said it will spend 10.6 billion euros ($14 billion) through 2015 as part of a plan to add two factories to its current nine and raise production to 3 million cars annually.

‘Biggest Challenge’

“The next 24 months will be tough for us as we have production constraints,” Soh said. “VW’s biggest challenge to growing sales is limited capacity in China.”

Hyundai Motor Co., which expects growth slower than rivals in China of 2.9 percent in 2011 to 720,000, is also affected by a capacity shortage, said Noh Jae-man, president of the automaker’s Chinese venture.

The phasing out of incentives including tax breaks for smaller vehicles and subsidies to rural car-buyers may disproportionately affect local carmakers in China.

The subsidy on smaller cars, which cuts the tax from 10 percent of the purchase price to 7.5 percent, applies only to cars with engines of 1.6 liters or smaller, a segment dominated by Chinese models.

Local brands accounted for more than 63 percent of the new models with that size engine last year, according to the China Association of Automobile Manufacturers.

Sales in China may also be boosted by new brands.

Honda Motor Co., Japan’s second-largest automaker, added its Li Nian brand’s S1 compact sedan yesterday in Guangzhou. Li Nian, created by Guangqi Honda Automobile Co., a Chinese joint venture owned by Honda and Guangzhou Automobile Group Co., is the first original marque developed between a foreign automaker and local joint-venture company in China, according to Honda.

GM will sell its first car in China under a new Baojun brand next year, it said last month. GM’s SAIC-GM-Wuling Automotive Co. joint venture produces the Baojun 630 car.

PSA Peugeot Citroen is also considering introducing a local brand with a Chinese name, it said in July.

--Liza Lin, Tian Ying and Rosalind Chin. With assistance from Makiko Kitamura in Tokyo. Editors: Ian Rowley, Kae Inoue.

To contact the reporter on this story: Liza Lin at llin15@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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