The coming of the World's largest automotive market

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The lure of the fast growing Chinese economy to foreign companies was never more evident than the June 2004 Auto China Show held in Beijing. Just 14 years after its inception, the show drew almost half a million visitors, and every credible auto company in the world. The reason for this heightened attention is the rapid growth of the Chinese car market over the last few years. Automotive production grew 68% in 2002 and a further 35% in 2003, topping 4.4 million vehicles and passing Germany as the third largest auto market in the world.

Passenger vehicle sales was the star industry performer in 2003 growing a staggering 80% as the Chinese population began to trade in its traditional bicycle for a more luxurious mode of transport. Auto sales grow at around 3% on average in Europe and the US. With so many people and a low penetration factor (less than 1% of driving-age Chinese own a car), the prospects for continued growth are bullish. A decade from now, China is expected to have passed Japan as the second largest auto market in the world (with 8% of all global sales) and two decades from now, it will have passed the United States as the world’s largest auto market.

Car manufacturers are seeing China’s rapidly growing 400 million strong middle class as its next growth market, and aim to have the products available to cater to the rising incomes and newly acquired taste for consumer products to demonstrate its new found affluence. And the very wealthy are also in abundance - Mercedes Benz, for example, expects to sell 1000 of it’s range topping Maybach’s every year and showrooms for the likes of Rolls Royce, Aston Martin and other top shelf auto makers are springing up in Shanghai and Beijing.

While the world’s largest auto manufacturers are all involved in joint-ventures in the Chinese market, some of the Chinese manufacturers are shaping up as serious players in their own right. With a massive and growing local market with significant price protection (in 2002, import tariffs were slashed from 70-80% to 40-50%), the Chinese industry looks set to produce several brands which will no doubt find their way onto the international market in the next few years.

One such promising manufacturer is the Chang’an company, which has been manufacturing in a joint-venture with Suzuki in recent years. The company already makes more than 100,000 vehicles a year, but surprised everyone with the styling and specification of two concept models shown at the Beijing show – the Yangtze River Sturgeon and the Chinese Dragon convertible. The Chinese Dragon may look like an MX-5 but is powered by a 3.2 litre V8.

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