Gm Swot in China
THE CHINESE AUTOMOTIVE INDUSTRY
Overview and Forecast
2003 heralded the coming-to-life of the Chinese automobile industry. Passenger car sales and production both eclipsed 75 percent growth rates, while automakers posted banner profits.6 Not unexpectedly, this market explosion prompted a bevy of new entrants, whose subsequent competition for market share reduced prices and drained the once limitless demand. Nevertheless, even with the fall from rosy profit margins and breakneck sales growth, China still represents the fastest growing automobile market in the world with far-reaching potential in sales and complementary services (see Exhibit 1). A record 1.7 million new vehicles were sold in China in the first three months of 2006.7 With the strong start, vehicle sales should surpass that of Japan, placing China as the world's second largest automobile market, behind only the United States.
The driving force behind the growth in automobile sales has been the burgeoning of the Chinese economy and in particular, consumer purchasing power. China's entry into the World Trade
Organization in 2001 energized the economy by removing barriers to foreign trade and investment.
The robust health of the national economy, as seen in the booming gross domestic product, has trickled down to the individual consumer. For example, the average annual disposable income of
Beijing urban residents has grown 71 percent over the last half decade, reaching 18,000 RMB (~
2250 USD) in 2005 (see Exhibit 2).
In consideration of the saving power of Chinese families, a substantial fraction of the urban population can now afford the introductory micro car or subcompact offering priced at less than
100,000 RMB (~ 12,500 USD). Indeed, private purchases in the passenger car sector and the micro car sub-sector have led the growth in overall car sales. As the purchase price of personal cars diminishes as an obstacle, the crucial factor will be the availability of key complements
Overview and Forecast
2003 heralded the coming-to-life of the Chinese automobile industry. Passenger car sales and production both eclipsed 75 percent growth rates, while automakers posted banner profits.6 Not unexpectedly, this market explosion prompted a bevy of new entrants, whose subsequent competition for market share reduced prices and drained the once limitless demand. Nevertheless, even with the fall from rosy profit margins and breakneck sales growth, China still represents the fastest growing automobile market in the world with far-reaching potential in sales and complementary services (see Exhibit 1). A record 1.7 million new vehicles were sold in China in the first three months of 2006.7 With the strong start, vehicle sales should surpass that of Japan, placing China as the world's second largest automobile market, behind only the United States.
The driving force behind the growth in automobile sales has been the burgeoning of the Chinese economy and in particular, consumer purchasing power. China's entry into the World Trade
Organization in 2001 energized the economy by removing barriers to foreign trade and investment.
The robust health of the national economy, as seen in the booming gross domestic product, has trickled down to the individual consumer. For example, the average annual disposable income of
Beijing urban residents has grown 71 percent over the last half decade, reaching 18,000 RMB (~
2250 USD) in 2005 (see Exhibit 2).
In consideration of the saving power of Chinese families, a substantial fraction of the urban population can now afford the introductory micro car or subcompact offering priced at less than
100,000 RMB (~ 12,500 USD). Indeed, private purchases in the passenger car sector and the micro car sub-sector have led the growth in overall car sales. As the purchase price of personal cars diminishes as an obstacle, the crucial factor will be the availability of key complements