China's car sales surged past the US to reach record levels last year on government incentives, and car makers are poised for solid but slower growth in the world's fastest growing major car market in 2010.
After a landmark year in which China zoomed past the US and Chinese car makers made some major acquisitions abroad, Beijing's renewed policy incentives to bolster demand will likely keep it as a bright spot for car manufacturers battered by the financial crisis.
Vehicle sales in the country jumped to a record 13.6 million units in 2009, the China Association of Automobile Manufacturers said, well above the country's previous target of 10 million units.
That compared with annual sales of 10.4 million cars and light trucks sold in the US, the lowest level in 27 years.
China's passenger car sales jumped 52.9% to 10.3 million units in 2009, rebounding sharply from single-digit growth a year earlier, official data showed. Car sales in December surged 88.7% to 1.1 million units, topping 1 million units for monthly sales for the third time this year.
Analysts attributed the boom largely to Beijing's policy initiatives, which had effectively lifted market sentiment and attracted buyers back to showrooms. A low comparative base in 2008, when car sales slowed to a single-digit growth rate for the first time in at least 10 years, also helped inflate the 2009 growth rate.
The market, they said, would return to a slower but more rational growth rate of roughly 10% in 2010 on continued policy support from the government even though the renewed tax incentives for small cars were not as aggressive as expected.
Industry executives themselves, including Chen Hong, president of SAIC Motor Corp, China's biggest car maker and a GM partner, remain sanguine about the outlook for next year, due largely to pent-up demand in smaller cities where cars are no longer a luxury item as wealth grows.
BYD, 10% owned by Warren Buffett's Berkshire Hathaway, raised its 2010 sales target last week after achieving its 2009 sales goal ahead of time. It now aims to sell 800,000 vehicles next year, up from a previous target of 700,000 units.
China is now a safe haven for industry heavyweights battered by a sharper than expected industry downturn, which had forced two of Detroit's big three car makers into bankruptcy in 2009.
General Motors agreed late last year to cede control of its flagship car venture to partner SAIC. Volkswagen also pledged to invest €4 billion in China until 2011 to expand its production capacity and shore up its research and development.
Ford, a relatively latecomer to China and a cautious player, broke ground in September for its long-contemplated $490 million third China plant.
The past year has also seen Chinese car makers venturing on to the global stage for the first time in a major way, ready to snap up big-name brands, such as Volvo and Hummer, which they previously admired from afar.
Zhejiang Geely Holding Group, parent of Geely Automobile, is on the verge of acquiring Ford's Volvo car unit, following Beijing Automotive Industry Holding's purchase of some Saab platforms in December.
Sichuan Tengzhong Heavy Industrial, an obscure machinery maker, has also agreed to take over GM's Hummer brand.
