Monday, November 01, 2010

Chinese Car Sales to Set a New World Record

Going into 2010, no nation exceeded the number of cars sold in the US in 2000, roughly 17 million. This year China is on target to match the 2000 US figure, and China should top 19 million next year. This is according to Right now, it looks like the total US light vehicle sales for 2010 will come out to about 12 million, so China is blowing away US sales right now.

In the short term, the growth in the Chinese market is good news for General Motors. GM can use profits from China to pay off pension and other obligations in the US. In the long term, though, the growth of the Chinese market is problematic. Over the next 20 years, Chinese car sales could hit 50 million per year. Keep in mind that although most US car sales replace a vehicle taken off the road, in China, most of the new cars sold will become an additional vehicle in service. This means that each vehicle sold in China will amount to more competition for the global oil supply and will produce more emissions contributing to global warming. In short, the closer China comes to US consumption patterns, the more Americans will have to conserve to keep from outstripping our resources.

Also, as China produces more units than the United States, China will increasingly see new economies of scale and will benefit from the learning curve cost declines on new technologies. In short, the same advantages that the US automakers had until recently will start working to the advantage of chinese manufacturers. This would be in addition to lower cost labor and newer factories. It will increasingly be difficult to maintain a domestic automobile industry while following a free trade economic policy.

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