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Chinese Auto Sales Skyrocket

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July 09, 2009 – Comments (3)

When I saw the headline, I had to read it twice because it was so impressive that I almost couldn't believe it:

China Car Sales Jump 48% on Support, Most Since 2006

Passenger vehicle sales in China exploded in June, up nearly 50% year-over-year.  Wow.  

As a result of the surge in sales, the China Association of Automobile Manufacturers increased its full-year vehicle sales forecast to over 11 million units, from its previous estimate of 10.2 million.  As a point of reference, the U.S. market will struggle to hit 10 million units in 2009.  For the first half of '09 vehicle sales in China rose 18%

The country's surge in auto sales is a great economic indicator.  It means that the Chinese economy is in pretty good shape and it could lead to an increase in the price of many metals and in the price of oil as Chinese demand for gasoline rises.

While the country's robust auto sales say good things about the economy, it isn't doing much for automakers profits there.  The intense competition in the Chinese auto market has crimped the profit of these companies.  The Combined profit at China's 19 largest automakers fell 9.9% through the first five months of 2009.  Welcome to the auto industry China.  U.S. automakers have been unprofitable for years.  The auto industry is only second to airlines in terms of a terrible sector to invest in.  Competition in the industry is always tough and it forces companies to cut prices (often through high incentives) to compete.

Deej

3 Comments – Post Your Own

#1) On July 09, 2009 at 7:16 AM, TMFBent (99.82) wrote:

But do you believe it, Deej? Are these those sales figures that are reported out of manufacturers, not out of dealers? Could we have tons of inventory sitting on lots, not actually being sold?

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#2) On July 09, 2009 at 7:29 AM, TMFDeej (99.41) wrote:

Very, very true Seth.  I always take any data out of China with a huge grain of salt.  Even if the manufacturers have exaggerated sales quite a bit things are still in a lot better shape in the Chinese auto industry than they are in the U.S.

Deej

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#3) On July 09, 2009 at 7:51 AM, TMFDeej (99.41) wrote:

Seth, I blogged about my skepticism of the Chinese auto sales figures here:

The Mystery of the Missing Chinese Cars

With sales increases like 50% being reported either the Chinese market is in pretty good shape or it is a HUGE mess that ison the verge of complete collapse with a ton of inventory sitting around.  Time will tell which it is.

Deej

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