China World's Largest Car Market

[Americano]

For those US nationalists poo-pooing the importance of China's consumer market potential, GM (the biggest foreign automaker in China) has sold more cars in China than in the US for the third straight month:

http://www.businessweek.com/news/2010-04-02/gm-sales-gain-in-china-on-government-stimulus-update1-.html

That makes me wonder if China will even bother entering the US car market in the near future, which is still stagnant from severe long-term US economic problems at a national level. Ford, which recently sold its Volvo Division to a Chinese company, seems to be the only remaining viable US auto manufacturer.

[Michael]

Wow!

That's big news - though I expect we're going to be seeing lots of news articles of this type over the next couple of decades as China overtakes the US in just about every economic category.

Fact is, China is going to overtake the USA for exactly the same reason that the US overtook Europe in the late 19th century. It is simply a function of having the largest uniform domestic market. No ethnic superiority requried.

[Americano]

Wow!

That's big news - though I expect we're going to be seeing lots of news articles of this type over the next couple of decades as China overtakes the US in just about every economic category.

Fact is, China is going to overtake the USA for exactly the same reason that the US overtook Europe in the late 19th century. It is simply a function of having the largest uniform domestic market. No ethnic superiority requried.

One of China's foremost goals has long been retention of food self-sufficiency, something the US forfeited in 2005. The massively subsidized US grain industry has long fantasized Chinese dependence on their grain, as has US geopolitical planning, but I don't think that's going to happen.

If China does in fact remain food self-sufficient, the value of China's consumer markets combined with their impressive personal savings rate offer the potential of an economic superpower that will dwarf the US. In 2009 49% of China's GDP was derived from industry and construction. And they're really just getting started.

[The Drunk Guy]

When I was car shopping/daydreaming last year, I researched the possibility of Chinese and Indian companies moving in. IMHO, America could use a good surge of <$10k cars and India and China are both chomping at the bit to offer them. However, it seems trade blocks for China won't be released any time soon and even that is only a possibility. Indian makers are in worse shape with a distant 'eh, maybe someday.'

[Americano]

When I was car shopping/daydreaming last year, I researched the possibility of Chinese and Indian companies moving in. IMHO, America could use a good surge of <$10k cars and India and China are both chomping at the bit to offer them. However, it seems trade blocks for China won't be released any time soon and even that is only a possibility. Indian makers are in worse shape with a distant 'eh, maybe someday.'

Warren Buffet's holding company is heavily invested in a Chinese car manufacturer. At this point in time I'd think their priority would be servicing domestic demand experiencing admirable growth rather than exporting another product to the declining US market and get paid in USD.

$10k new cars in the US would be the death blow for GM, badly cripple Ford and severely disrupt the used car market. We need them in volume but with our short term planning I think they're at least five years out.

[Zarquon]

When I was car shopping/daydreaming last year, I researched the possibility of Chinese and Indian companies moving in. IMHO, America could use a good surge of <$10k cars and India and China are both chomping at the bit to offer them. However, it seems trade blocks for China won't be released any time soon and even that is only a possibility. Indian makers are in worse shape with a distant 'eh, maybe someday.'
TATA (http://en.wikipedia.org/wiki/Tata_Motors)(which is already "in" the US as it owns Jaguar and Land Rover) has plans to launch its $2500 Nano (http://en.wikipedia.org/wiki/Tata_Nano) in the US, but probably over the next 5 years, and they will have to double the price for all the new features they will have to add and the regulations they will have to meet.

[Americano]

TATA (http://en.wikipedia.org/wiki/Tata_Motors)(which is already "in" the US as it owns Jaguar and Land Rover) has plans to launch its $2500 Nano (http://en.wikipedia.org/wiki/Tata_Nano) in the US, but probably over the next 5 years, and they will have to double the price for all the new features they will have to add and the regulations they will have to meet.

TATA is an impressive company. Its success has been based on meeting market needs rather than the US auto industry broken slogan of 'this is what you will drive'.

[Michael]

I just don't see the logic (or profit) of an Indian or Chinese car company bothering to export to the US market with one of their cheap cars (other than for 'prestige' reasons).

In the short term, it is far more rational for them to supply their own booming domestic markets with these cheap vehicles. With the profits, resources and ingenuity they gain by doing this, they will probably dominate the US market in ten to fifteen years from now anyway.

[The Drunk Guy]

I just don't see the logic (or profit) of an Indian or Chinese car company bothering to export to the US market with one of their cheap cars (other than for 'prestige' reasons).

In the short term, it is far more rational for them to supply their own booming domestic markets with these cheap vehicles. With the profits, resources and ingenuity they gain by doing this, they will probably dominate the US market in ten to fifteen years from now anyway.
Just look at the TATA Nano. In India, it runs $2500. They'll buff it up some to meet American 'standards' and then throw in some bad-ass warranty. It will not be $5000 when it rolls into the states...it'll be $9500, which is about what a three-year-old American car runs. They can make a fortune selling something at an inflated price that is still an excellent deal for the US auto buyer.

And China has a booming auto market, but the US is designed for autos and will forever be a huge market. Any situation short of a total collapse leaves that market largely intact. Sure, GM and Chrysler just about bought the big one, but you never heard any of the foreign companies complaining. Just to stress how many there are...Isuzu, Mitsubishi, Subaru, Hyundai, Honda, Mazda, Nissan, Toyota, Kia, BMW, Mercedes, and Volkswagen.

[Americano]

Think about these numbers when considering the potential market for cars in China and India:

US - 850 cars per 1,000 people, population 320M (35 per person in 1916)

China - 35 cars per 1,000 people, population 1,337M

India - 7 cars per 1,000 people, population 1,179M

As standards of living in China and India increase car sales are and will be explosive.

[Michael]

Think about these numbers when considering the potential market for cars in China and India:

US - 850 cars per 1,000 people, population 320M (35 per person in 1916)

China - 35 cars per 1,000 people, population 1,337M

India - 7 cars per 1,000 people, population 1,179M

As standards of living in China and India increase car sales are and will be explosive.
Yes, that's why I don't see any reason or much profit to re-design cars to meet US safety and emission standards and export them halfway around the globe when there is a far larger market right there in China/India - without any of the safety, emissions, labor or consumer protections required by the US market.

[Americano]

Yes, that's why I don't see any reason or much profit to re-design cars to meet US safety and emission standards and export them halfway around the globe when there is a far larger market right there in China/India - without any of the safety, emissions, labor or consumer protections required by the US market.

And payment in USD, no small concern.

[Greendruid]

There is another consideration concerning Indian and Chinese automobiles in general and our recent winter probably wasn't the best to exemplify my point. However, I cannot see tiny cars like these making it into many of the northern latitude markets for the simple fact of the weather. A small car will not make it through a rural Canadian, northern American or Swedish winter.

On the other hand, the increased growth in urban populations in all of these locations may be sufficient to nullify this factor. Considering how cities are known for creating their own (warmer) weather patterns even in these northern climes getting through snow and ice seems to be less of a problem. That and the lack of need of a car in fairly large urban centres that have 500k+ people.

[Americano]

There is another consideration concerning Indian and Chinese automobiles in general and our recent winter probably wasn't the best to exemplify my point. However, I cannot see tiny cars like these making it into many of the northern latitude markets for the simple fact of the weather. A small car will not make it through a rural Canadian, northern American or Swedish winter.

My major experience with living in harsh winter weather was in Northern Idaho. 4' of snow on the deck and -30F/-34C weather. I drove a 4x4 Bronco with, for winter, studded, aggressive tread mud&snow tires. My uncle had a place there where we found three 1930s vehicles, intact but ravaged by probably 40-years of living in a forest. People in that part of Idaho (60-miles south of the Canadian border have been using vehicles in severe winter conditions since the Ford Model T (http://en.wikipedia.org/wiki/Ford_Model_T). The TATA Nano strongly resembles Henry Ford's business plan.

On the other hand, the increased growth in urban populations in all of these locations may be sufficient to nullify this factor. Considering how cities are known for creating their own (warmer) weather patterns even in these northern climes getting through snow and ice seems to be less of a problem. That and the lack of need of a car in fairly large urban centres that have 500k+ people.

A new car for $10k in the US with an encompassing warranty would initially be geared to the best numbers, urban and rural dwellers who can't afford a presently priced new car but require a transportation vehicle, a huge market.

Again, why go through the effort when resources can be directed at domestic markets with highly desirable demand?

[Greendruid]

My major experience with living in harsh winter weather was in Northern Idaho. 4' of snow on the deck and -30F/-34C weather. I drove a 4x4 Bronco with, for winter, studded, aggressive tread mud&snow tires. My uncle had a place there where we found three 1930s vehicles, intact but ravaged by probably 40-years of living in a forest. People in that part of Idaho (60-miles south of the Canadian border have been using vehicles in severe winter conditions since the Ford Model T (http://en.wikipedia.org/wiki/Ford_Model_T). The TATA Nano strongly resembles Henry Ford's business plan.



A new car for $10k in the US with an encompassing warranty would initially be geared to the best numbers, urban and rural dwellers who can't afford a presently priced new car but require a transportation vehicle, a huge market.

Again, why go through the effort when resources can be directed at domestic markets with highly desirable demand?

Oh I totally agree on that point. I just don't think it will spell the end of the larger vehicles that seem to be needed in such conditions and the North American manufacturers, love 'em or hate 'em, have been in that game for a long, long time.