Market News

 January 10, 2014
China vehicle sales surpass 20 million as smog chokes cities

 China became the first country in which more than 20 million vehicles were sold in any given year as Toyota Motor Corp. to General Motors Co. and Volkswagen AG delivered a record number of cars there.

Total deliveries rose 14 per cent to 21.98 million units last year and may exceed 24 million in 2014, the state-backed China Association of Automobile Manufacturers said today in Beijing. Last year's sales of passenger vehicles, excluding buses and commercial trucks, climbed to 17.93 million---or 15 per cent more than the US auto industry---and may increase 9 per cent to 11 per cent this year, it said.

While China's motorisation has been a boon for foreign automakers---all the major ones saw record sales in the country in 2013 -- pressure is building on the government to step in as pollution chokes residents and traffic congestion turns roads into parking lots. With air quality deteriorating so much that children and the elderly are regularly warned to stay indoors, Beijing is tightening its vehicle quotas and Tianjin is capping the number of licenses issued this year.

"As more and more big cities put in place restriction measures, automakers will have to count on smaller cities and inland areas for growth," said Harry Chen, a Shenzhen-based analyst with Guotai Junan Securities Co. "Local automakers will really need to bring on their A-game to compete with foreign joint ventures to survive."

Year in review

GM, which counts China as its biggest market, saw sales climb 11 per cent to 3.16 million in the country last year. Though the Detroit-based carmaker outsold all foreign automakers in China for eight straight years, it may lose that lead when Volkswagen reports 2013 figures later this month. The Wolfsburg, Germany-based company surpassed its previous annual record by selling 2.96 million vehicles in the first 11 months.

Ford Motor Co., which got a late start in China, benefited from the popularity of its Focus car, helping the company post the biggest growth among major foreign automakers. China deliveries surged 49 per cent to 935,813 units, outselling Toyota on annual basis for the first time.

Toyota, the global leader in auto sales, fell to No. 6 among foreign automakers in China, though Japanese carmakers rebounded from the backlash of 2012, when a territorial dispute over a group of uninhabited islands led to violent protests that prompted Chinese consumers to shun Japanese-branded cars.

Toyota's sales climbed 9.2 per cent to a record 917,500 units in the country and forecast deliveries will climb to more than 1.1 million this year. Nissan Motor Co. and Honda Motor Co. also sold a record number of vehicles after posting declines in 2012.

Tightening restrictions

By contrast, Chinese brands saw their combined market share at home fall 1.6 per centage points to 40.3 per cent, according to the auto group. Their exports dropped 7.5 per cent, the first decline in five years, because of unstable overseas demand and insufficient competitiveness, it said. Great Wall Motor Co. shares tumbled as much as 10 per cent today in Hong Kong trading.

Ford's Focus was the best-selling car last year, while Great Wall's Haval topped SUV sales.

The increasing number of cars has come at the expense of air quality, leading the nation's industry ministry to warn last month that auto sales may slow this year as more cities cap the number of new autos to meet central government targets for reductions in air pollutants.

China's 'airpocalypse'

China, the world's biggest carbon emitter, is home to some of the world's most polluted cities, with smog levels that can surpass World Health Organization safety thresholds by almost 40 times. Outdoor air pollution was found to cause lung cancer and linked to an increased risk of bladder cancer, a WHO agency said last month, rating it as a carcinogen for the first time.

The northern Tianjin municipality began restricting its car population this year, joining Beijing, Shanghai, Guangzhou and Guiyang in imposing vehicle quotas.

Shanghai, which is considering a congestion charge for motorists, last month experienced record levels of the lung- constricting smog that teary-eyed Beijing expatriates have come to call the "Airpocalpyse." In Xi'an, the former imperial capital known for its terracotta warriors, pollution soared to 38 times the WHO threshold.

To combat air pollution, China's State Council, or cabinet, released a national plan in September that called for a 15 per cent to 25 per cent reduction in particulate matter by 2017 in the three key manufacturing regions anchored by Beijing, Shanghai and Guangzhou.

Vehicle emissions now account for 20 per cent of PM2.5 fine particulate matter that pose the greatest health risks because they can penetrate deep into the lungs, according to the official Xinhua News Agency.

In India, automakers saw total sales, including trucks and buses, fall 9.2 per cent to 3.24 million units in 2013, the Society of Indian Automobile Manufacturers said in New Delhi today. Deliveries slumped as slowing economic growth and expensive loans kept buyers from showrooms. Passenger-vehicle sales dropped 7 per cent to 2.5 million units.