Time out for China’s red-hot auto sales.

After red-hot auto sales, China shifts into a lower gear. By Bertel Schmitt, CEO Sinamotive Group (HK) Limited.

What a difference a month makes. A few weeks ago, the big automakers still looked at China as a threat. When auto sales tanked last month in the U.S., and fell in Europe, automakers looked to China to save their numbers. China won’t be able to make up for the losses in the West. According to statistics released by the China Association of Automobile Manufacturers, passenger vehicle sales in China fell for a second month in a row in September. They dropped 1.4% from the same period in the prior year to 552,800 vehicles. There are worries about a demand slowdown in a country where double digit growth rates used to be the norm.

Sales of passenger vehicles in the January-September period increased by a solid 11.4% to 5.1 million units. 2007 had seen 21.8%. Based on the September drop in passenger-vehicle sales. a full-year sales growth in the single digits is being projected. What is worrysome is that September is usually a strong sales month in China, when consumers buy cars ahead of the Golden Week holiday.

Volkswagen AG was the hero. After so-so sales in prior years, VW sold 772,783 vehicles in China from January to September. This amounts to a 13% rise compared to the same period in the prior year. Volkswagen’s Audi luxury brand contributed most. Volkswagen China plans to sell a million cars in 2008, which would translate to an increase of 9.8% from the 910,491 vehicles in the yedar before. According to VW’s Finance Director, Volkswagen plans, for the first time in history, to sell more cars in China than in its home market Germany in 2008.

The pause in sales doesn’t mean that the Chinese auto market is saturated. Far from it. By the end of 2007, the total number of all vehicles on the roads of China reached 57 million units, up 14.3 percent from the year 2006. However, the total includes 14.68 million three-wheeled vehicles and low-speed vans. Currently, China’s vehicle ownership per thousand populations is below 50. The number is 740 in the United States, and more than 500 in Europe. China has a long ways to go before reaching saturation. Total output of the world’s automakers is rated at 69 million motor vehicles annually. Even if the whole world would produce for China only, it would take more than ten years to saturate China’s market.

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