China poised to be world’s largest auto market

updated 8:47 p.m. ET Feb. 4, 2009

SHANGHAI - Two years ago, China zoomed past Japan to become the world's No. 2 vehicle market.

Now it looks poised to pass up the United States to be the biggest.

While car sales in China have slowed lately, they haven't plummeted like those in the U.S., where January sales tumbled 37 percent from a year ago to 656,976 vehicles, a 26-year low.

Official Chinese auto data comes out next week, but January sales are expected to decline 8 percent to 790,000 units, Zhang Xin, an analyst at Guotai Junan Securities in Beijing, said Wednesday.

"This is the first time in history that China has passed the United States in monthly sales," Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis, said in a conference call late Tuesday.

DiGiovanni projects that Chinese auto sales could hit 10.7 million vehicles in 2009, more than his estimate of 9.8 million unit sales in the U.S. this year. Autodata Corp. forecasts 2009 U.S. sales at 9.57 million.

General Motors, which last year surrendered its crown as world's largest automaker by annual sales to Toyota Motor Corp., has a clear stake in China's automotive future.

GM is already is one of biggest automakers in China, with billions of dollars invested in joint ventures, and a record 1.09 million vehicles sold in 2008, up 6 percent from the year before. Like its global rivals, GM has been counting on the growth in China and other emerging markets to help offset losses elsewhere.

China overtook Japan in 2006 to become the world's second-largest vehicle market, thanks to strong sales to the country's fast-growing middle class. With 1.3 billion people, China was bound to catch up with the U.S. — population 300 million — at some point, but the dramatic contraction of the American market could make that happen sooner than expected.

Of course, if U.S. sales recover strongly in coming months, outpacing those in China, the American market would remain the world's biggest.

China's auto market has cooled after several years of torrid growth, and authorities have implemented tax cuts, subsidies for small-car purchases and plenty of promotions are luring car buyers back into showrooms.

Police officer Zhou Yingbin, newly married and facing a tough commute, recently spent three hours haggling in a Shanghai dealership, and saved himself a few hundred dollars off the price of his new Honda Fit.

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