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In 2006, the Chinese passenger car market, including sedans, SUVs and MPVs, is expected to grow to around 4.1 million units, nearly a 25 percent jump over 2005. This volume puts China third in the world behind Japan in the passenger car segment. China's total vehicle sales volume (including all trucks & buses) in 2006 is expected to reach 6.9 million units and overtake Japan as the world's No. 2 in market size.

 

Demand in 2006, especially in the first half of the year, was very strong. The market grew more than 50 percent month-over-month. Jetta, Excelle and Xiali remain the top three models. All segments grew in 2006 and the C-segment accelerated again this year.

 

Although a weak first half in 2005 can be attributed as a reason for 2006's crazy half-year boom, there are other factors behind the quick growth.

 

It is believed that two fundamental reasons are more convincing than the other factors: one is rising income and the other is quickly decreasing car prices in the past two years. These two factors quickly enlarged the customer base, especially in the second-tier cities in some large provinces, such as Shandong, Hebei and Liaoning.

 

The car market did not grow quickly in the A-segment, which further proved that Chinese do not like mini cars, even after the discriminative traffic control policies were lifted earlier this year.

 

Volkswagen has two joint ventures in China with the nation's two largest automotive producers First Automotive Works Corp and Shanghai Automotive Industry Corp.

 

In the first three quarters of this year, Volkswagen's sales in China grew by 28.7 percent to 524,558 units.

 

China's car market is poised for rapid growth over the next few years, boosted by enormous consumer demand and a growing replacement and second-hand car segment, according to recent surveys conducted by US market research firm ACNielsen.

 

An ACNielsen telephone survey of 1,500 respondents in Beijing, Shanghai and Guangzhou conducted in May and June revealed an increase in car ownership and purchase intentions.

 

The survey found that 28 percent of Beijingers own a car, followed by 18 percent of people in Guangzhou and 11 percent of people in Shanghai.

 

This represents major growth since 2004, when car ownership in these three key cities stood at 11, 5 and 4 percent.

 

According to the survey, 13 percent of respondents claimed they planned to buy a car within the next 12 months, which is nearly twice the amount of 2004.

 

Another ACNielsen Internet survey, which polled 1,800 Chinese netizens in July and August, showed that more than 10 percent of car owners had purchased a second-hand vehicle, and nearly a quarter of prospective buyers were planning to buy a second-hand car.

 

Despite the immense market potential, big challenges lie on the horizon for automakers in China.

 

Brand competition will escalate in China's car market since a majority of potential buyers will be attracted to newly launched vehicles. This will have a powerful impact on long-established brands and models, said Philippe Coquelle, director of ACNielsen China Automotive Research.

 

"The remerging replacement and second car market are signs of the maturing of China's car market. At the same time, car consumers are now equipped with greater knowledge about cars and are getting pickier," Coquelle said.

 

"Product innovation and cultivating brand loyalty will be a greater-than-ever challenge."

 

Boosted by brisk sales and manufacturers' cost-cutting efforts, the auto sector in China has regained sales growth this year after tumbles over the past two years.

 

The sector, including vehicles, spare parts and motorcycles, earned 54.47 billion yuan (US$6.89 billion) in the first three quarters of this year a jump of 48.87 percent from a year earlier, according to data from the China Association of Automobile Manufacturers.

 

(China Daily November 20, 2006)