China officially world’s largest auto market

According to statistics released Monday in China by the government run news agency Xinhua, the United States is officially no longer the largest auto market in the world. Last year, China took that spot by purchasing 3.21 million more vehicles than the US. The recession played a big part in this as it hurt the US market a lot but did not do the same in China which still had tremendous growth. The good news for Americans in this is that GM and Ford have benefited greatly from China’s rise in automobile purchases. The two American auto makers have a strong presence in China, especially GM as it is among the top three sellers there.

So the good news is clear, but what about the negative side to this new fact?  Well, this was inevitable since China is the most populated country on earth but, still it is significant to the balance of power. In general, the larger a country’s economy is, the more powerful it is. With power comes the ability to influence negotiations on trade agreements and the ability to attract the brightest and the best which leads to even more prosperity. However, although this is a milestone for China it is still well behind the US in its overall economy size.

Another important note to this report was that China also became the largest auto producer in the world. This seems at first glance as big of a deal as the first part but, there is something important in this that makes it far less important, actually two points. The first is that although China produces a lot of cars, they still have not developed even one reputable brand on their own. They are trying to purchase existing brands in order to learn the technology so that they can make their own eventually. However, whether or not that strategy will work remains to be seen. At the end of the day, if you don’t have your own brand then you really aren’t a major player on the producing side of the industry. If you look at the three leading countries in cars (United States, Japan, Germany) they each have at least 3 well known companies and a multitude of brands. This takes a lot of time to create and even then it is no guarantee that it will happen at all.

The second reason that China being the largest manufacturer of automobiles is not as important as it appears is because that is what China should be doing. As I wrote in a previous post titled “Manufacturing jobs available but no one wants them”, less developed countries should be the manufacturing hubs of the world while more advanced nations should lead in the business side of companies. Even though some manufacturing is not simple and cars are a good example, it still should eventually be done in less developed countries. I am not talking now or in the immediate future so, China being number one right now is interesting because their manufacturing quality is no where near where it needs to be and will make a Chrysler car look like a Rolls Royce but, I think the high output speaks to the sheer size of China. Also, the Chinese consumer is likely not used to good and reliable cars as we are in North America because we have depended on cars for many years and haven’t had to buy domestic cars that are that low in quality so it is easier for them to stomach today’s Chinese made vehicles. However, this will not hold true for the rest of the automobile consuming world so China is still years off from selling Europeans and North Americans one of their cars.