China car sales forecast to rise 20% in 2014 as demand rebounds
Analysts expect China's passenger car market to accelerate sharply in 2014, reversing recent slowdowns as subsidies return and urbanisation drives new demand.
China’s passenger car market is expected to post a 20% increase in sales in 2014, according to analysts tracking the sector. The forecast comes after a period of slower growth and policy-driven volatility, with new government incentives and rising urban incomes set to drive renewed demand.
The projected 20% growth rate for 2014 marks a notable acceleration from the 2.5% increase recorded in 2011, and a sharp contrast to the 46% fall seen in 2009. Analysts attribute the rebound to a combination of factors: the return of purchase subsidies, easier credit conditions and continued urbanisation, which is expanding the pool of potential car buyers.
Policy support and urbanisation drive demand
In May 2012, the Chinese government introduced a subsidy programme worth 6 billion yuan (US$944 million) aimed at stimulating demand for vehicles with engines of 1.6 litres or less. This move reversed an earlier withdrawal of incentives that had contributed to the market’s slowdown. Eased monetary policy has also improved access to vehicle finance, helping more consumers enter the market.
Urbanisation remains a central driver. As more Chinese move to cities and incomes rise, car ownership is expected to climb. By 2011, China’s vehicle penetration had reached 56 cars per 1,000 people, well below the global average of 125 per 1,000 in 2009. BBVA analysts forecast that this figure could reach 113 per 1,000 by 2015, following trends seen in other Asian economies such as South Korea and Taiwan.
Market not yet saturated
Despite years of rapid growth, China’s car market remains far from saturation. The country’s rate of car ownership lags behind not only developed economies but also some emerging Asian markets. This leaves considerable room for expansion, especially as government policy now supports purchases of smaller, more affordable vehicles.
The recent volatility in sales figures was largely due to policy shifts. The removal of subsidies and tighter credit conditions had dampened demand, but the government’s willingness to adjust policy in response to market conditions has proved effective in stimulating renewed growth. The focus on small-engined cars aligns with both environmental goals and the purchasing power of the emerging middle class.
Outlook for manufacturers and suppliers
With car ownership still well below global averages and government policy supporting further expansion, China’s car market is positioned for another strong year in 2014. The combination of revived subsidies, urbanisation and rising incomes provides a robust foundation for growth, although the pace will remain sensitive to future policy decisions.
