Coming on the back of a year when inventories piled up to a record 100,000-plus and car prices sank, the comment might seem a little strident to anyone unfamiliar with the big picture.
The big picture, drawn by the World Bank in 2002, showed the United States with nearly 800 vehicles per 1,000 population and China with 12. In 2004, industry association data showed year-on-year China sales up 15%, but there were months where expansion drifted to near zero. For China's auto sector accustomed to annual growth rates of 40% or more, 2004 was certainly margin-adjusting: while steel prices jumped by a third, car prices dropped an average 10%.
Murtaugh, noting GM China's market share now topped 10%, could look back on an eventful year: its auto finance unit, a great sales generator in developed markets, had finally been launched, and at least on one occasion the company displaced Volkswagen (VW) in monthly sales after 25 years of VW ruling the China market.
VW and GM rule China's rich coastal economy, while Ford, a latecomer, entered the market via Chongqing in the country's poor interior. Vehicle sales across China totaled 5.07m in 2004. Premium marques like Germany's BMW had a tough year, but South Korea's Hyundai Motor quickly introduced its economy Elantra sedan and sales more than doubled.
Foreign carmakers (the Czech Republic's Skoda being the latest arrival) are still charging in and the ones in place are still expanding. "Investing is committing suicide, and not investing is waiting for death," observed industry analyst Jia Xinguang in the Los Angeles Times in February.
Honda Motor, which began China operations five years ago pushing out 30,000 cars, now has capacity for 270,000, and plans to raise that to 530,000 by 2006 – 120,000 of them earmarked for export.
Which brings us back to the big picture: China's domestic market has lots of potential, but Beijing needs more export activity. Investment in new capacity will reach US$25.5bn by 2007. Even with plans to nearly double expressways to 85,000km by 2020, there comes a point when one has to ask where China can put all the cars it is making.
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