China's Influence Grows in Global Auto Market

China's car buyers have become an important force in the design decisions of automakers from Nissan (PINK:NSANF, TYO:7201) to General Motors Co to Volkswagen AG. Their influence is starting to be seen in vehicles sold worldwide. The reason of course is that China's auto market surged past the United States last year to become the largest in the world at a time when sales elsewhere are so weak that  major  brands currently make most of their global profits in China. "From volume cars to luxury cars, we can see that all car makers are trying to design cars to fit Chinese tastes," said John Zeng, an analyst for IHS Global Insight.

Automakers are modifying luxury cars to accomodate China's new rich and creating scaled-down sedans and minivans for the enormous lower- income family market. China's growing influence represents another defining period of expansion in the auto industry's history - from Europe to Detroit a century ago and the rise of Japan since the 1970s. GM was a pioneer in designing for the Chinese market. Its Cadillac unit created its 2008 CTS for China, giving it a larger back seat for Chinese buyers who sit in back while their chauffeur drives. That model was sold worldwide, so Cadillac customers every- where got the added legroom. Other producers are following. Daimler AG's Mercedes-Benz debuted an extended E-class sedan for China at the Beijing auto show. Ford Motor Co's Volvo Cars (NYSE:F) and Volkswagen AG's Audi have created Chinese models with bigger back seats.

China had almost no private cars 15 years ago. But sales have grown so fast since then that the country already is the biggest market for VW, Europe's biggest auto- maker. It could replace the United States as GM's top market by vehicles sold as early as this year. GM sold 2.1 million cars and trucks in the United States in 2009 and says total China sales of all its brands, including those with local partners, should pass 2 million this year, four years ahead of schedule. "The lines are going to cross. It's only a matter of when," said Tim Lee, GM's president for international operations outside North America and Europe.

Automakers and industry analysts say Chinese car ownership levels are still so low that sales, from luxury to economy brands, should grow strongly in coming years as millions of families buy their first car. Total   vehicle    sales    rose    72 per cent in the first quarter of 2010 and most analysts predict growth of 10-25 per cent this year, with double- digit growth for the foreseeable future. They also point to the fact that when China last year became the world’s largest car market, it got there 10 years early – most analysts did not expect it to happen until 2020. China’s auto market is just one of the beneficiaries of the surge in domestic consumption that began in earnest last year and will continue for years to come.

Adam Roseman, Founder & CEO, ARC China