China Auto Sales to Surpass 20M This Year image

Analysts expect sales in China to surpass 20 million this year, due to a spur in urbanization and economic growth.

According to China Association of Automobile Manufacturers, wholesale deliveries are expected to increase 7% in 2013 to 20.65 million units, due to increased demand for passenger vehicles. Still, the SUV segment will remain the fastest-growing among all segments, compared with the commercial vehicles which will see a slight gain.

“A continuous and stable macroeconomic policy will be good for the development of the vehicle market,” CAAM said. “Vehicle demand will be supported by urbanization and there exists a big market potential for exports.”

Although auto demand in China is predicted to accelerate this year, the pace of growth will be less than a quarter from the 32% increase in 2010, as big cities such as Guangzhou and Beijing restrict new vehicles in order to reduce traffic jams and smog. Competition for market share will be tough, as foreign automakers such as GM and VW will expand into smaller cities to win the race for the no.1 automaker.

“Not everyone will be the winner but some of the automakers that invest previously in R&D will be,” said Jeff Chung, Hong Kong-based analyst at Daiwa Securities Group Inc. “The automakers with the best product mix, best geographic mix will still enjoy very high growth rates.”