Chinese Passenger Car Market Slips into Top Gear with Government Backing

BEIJING - October 22, 2007: Passenger cars are fast becoming a necessity in China, with the country’s high gross domestic product (GDP) rates encouraging people to invest in the market. The Government has also taken active steps such as lowering the tariff on imported cars to propel the Chinese passenger car market.

New analysis from Frost & Sullivan (www.automotive.frost.com), Chinese Passenger Car Market, reveals that the total sales volume of passenger cars has jumped from about 1.2 million in 2001 to over 5.17 million in 2006. Moreover, China has overtaken Japan to be the second largest automotive consumer in the world in 2006.

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Reduced tariffs will enable foreign companies to slash the prices of their cars and compete with the products of domestic OEMs. Meanwhile, new rules on the qualification evaluation of car dealership will ensure the elimination of car dealers without authentic authorization, aiding fair competition in the market.

“Policies have also been drafted to improve the quality of car parts and components to guarantee the safety of passengers,” says Frost & Sullivan Industry Manager Cecilia Yuan. “The move to promote the consumption of low-cylinder volume cars will not only improve their effect on the environment, but also raise the prices of luxury cars.”

Further, the State Council’s mandate to rationalize the structure of the automotive industry will curb irrational expansion of production. All these factors expect to go a long way in accelerating the passenger car market’s development.

In 2006, China outstripped Japan as the second largest vehicle consumer in the world and it is likely to sustain this high growth in 2007. The sales of passenger cars and commercial vehicles expected to increase by 22 percent and 7.8 percent, respectively, to touch 6.30 million and 2.20 million. The Chinese automotive market anticipates rolling out 8.5 million units in 2007, 15 percent more than 2006.

“Sedans claimed the largest market share, followed by minibus, sport utility vehicle (SUV), and multi-purpose vehicle (MPV), with market penetration rates of 74 percent, 17.7 percent, 4.5 percent, and 3.6 percent, respectively,” notes Yuan. “The Chinese Spring Festival in January also ensured that the sales of passenger cars rebounded in March and peaked in December.”

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