Passenger Cars to Steer the Auto Industry on the Highway to Growth

PALO ALTO, Calif., July 28 -- The passenger car segment is witnessing high growth with a slew of new launches at varied price points. Small cars priced below $12,000 for the masses and luxury cars and sport utility vehicles targeted at wealthy individuals are attracting increasing demand.

"Growing urban disposable incomes, easy access to credit coupled with lower interest rates, removal of price controls, and frequent model launches are likely to propel double digit growth, while triggering intense price competition among manufacturers," says Frost & Sullivan Senior Analyst Bob King.

Continuing government investment in building road infrastructure is also expected to aid long-term growth, especially in the commercial vehicle industry. There will be higher demand for heavy trucks, which offer better operating economy, while widespread industrial development will increase corporate demand for buses. The component markets are expected to thrive on this burgeoning sales across different vehicle segments.

"China's entry into the World Trade Organization (WTO) is expected to pose several long-term challenges for the highly fragmented domestic automotive industry," says King.

WTO stipulations have resulted in the fall of import duties and increased the availability of low-priced imported vehicles and components, while stricter emission norms are necessitating higher investment in engine technologies. This is forcing local companies to either get acquired or exit the market.

"Multinationals are scouting for strategic partners to establish joint ventures and take advantage of the emerging level-playing field, as localization norms, licensing procedures, and quota restrictions are gradually removed and laws protecting intellectual property rights are being implemented," says King.

The component markets are expected to thrive on this burgeoning sales across different vehicle segments.

Frost & Sullivan is a global leader in strategic growth consulting and training. Frost & Sullivan also offers custom growth consulting to a variety of national and international companies. Executive summaries and interviews are available to the press.

           Strategic Insight of the Chinese Automotive Industry
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