A Chinese Ford Focus. Motorists there buy more cars than Americans - but spend less for them.
Chinese car sales unexpectedly slowed down last month but, barring a Russian-style meltdown of the Asian nation’s economy, it is forecast to remain the world’s largest automotive market. From a unit sales standpoint, anyway. But the U.S. retains its lead in at least one critical metric.
Measured by the value of the new vehicles sold last year, the States had a $161 billion lead over China, according to a study by data tracking service TrueCar Inc. That reflects the fact that Americans tend to buy larger, more lavishly equipped vehicles.
“While the growth of China’s new vehicle market over the last decade has been impressive, the total value of that market remains considerably lower than the U.S. and will remain so for some time,” said John Krafcik, president of TrueCar.
(Strong demand in China helped Audi set all-time sales record in 2014. Click Here for more.)
During the early years of China’s automotive boom, the bulk of the market was made up by government and business elite who tended to focus on higher-end models. But as the country’s emerging middle class entered the market they tended to focus on smaller, less expensive models, such as the popular Wuling microvans that go for anywhere from $5,000 to $10,000 apiece.
Overall, the 19.7 million new vehicles sold in China last year went for an average $20,805 based on TrueCar’s study of more than 750 models and trim levels. By comparison, the U.S. average was $34,537.
So, even though U.S. car sales lagged at just 16.5 million last year, they generated $571 billion in revenue, about 19% more than the $410 total for China.
How much longer the U.S. will retain that lead is far from certain. China has topped the U.S. in overall new vehicle sales volume since 2009. And industry analysts had forecast that total sales would reach around 21.1 million this year. That would mark the slowest growth rate in a decade, reflecting the general cooling of the Chinese economy. But there are signs that even that target might be optimistic.
(Sluggish Chinese demand forces Tesla to cut jobs. Click Herefor the story.)
For the first two months of this year, Chinese motorists purchased 3.43 million passenger vehicles, an 8.7% year-over-year increases, according to the China Association of Automobile Manufacturers. But the annual growth rate was 11% in January-February 2014.
Separately, vehicle prices have risen significantly in recent years. Those Wuling vans, for example, went for as little as $2,500 a decade ago. Vehicles manufactured by domestic Chinese automakers tend to command a lower MSRP, according to the TrueCar study, an average $15,706, compared with $32,278 for products sold by foreign brands, such as Buick.
“Vehicle prices will continue to rise, yet global automakers competing for China’s consumers must also continue to share half of everything they make in the region with domestic market partners,” noted TrueCar President Krafcik.
That’s because Chinese law limits foreign manufacturers to owning no more than 50% of their ventures in that country.
The TrueCar study may slightly overstate the gap between the two markets in terms of total revenue from new car sales. It focused on MSRP numbers, rather than Average Transaction Prices, the figure consumers actually spend after working in options and incentives. That’s because data on Chinese rebates and other discounts can’t be readily accessed.
The study also looked at the value of the used car markets in both countries and found an even bigger gap. A large share of Chinese new car buyers are getting wheels for the first time, so relatively few trade in old vehicles, especially compared to the U.S., where that’s the norm.
So, with fewer “previously owned” vehicles to choose from, the market in China totaled just $58.7 billion last year, while revenues from used car sales in the States came to $604.4 billion, according to TrueCar – slightly more than for the new car market.
(Click Here to check out the 10 hottest new models to debut at this year’s Geneva Motor Show.)
We americans overpay for everything. From insurance, health care, housing and espicially automobiles and trucks and suvs. Same engine and transmission and suspension and yet the difference between a cop car municipal bid price and a luxury upscale brand can easily be 30thousand plus. Makeb it suv and make it 60thousand. This is why literially why it near imposssible for foreign actual manufacturers to break into the innercircle. Keeps the real low cost competitors away. No competition. Example mahandra from india.
While it’s true that U.S. consumers do overpay on many items where there is an industry monopoly like insurance, health care, crude oil products, etc. on autos you have much more choice.
It’s worth noting that cop cars are generally sold at close to cost for a variety of reasons including marketing, good will, etc. Thus comparing bid costs on a municipal vehicle vs. retail price for a similar type vehicle, is comparing apples to oranges. There is no doubt that consumers pay for ALL marketing, good will, theft, etc. and that is always included in the retail price of goods.
As far as imports from third world countries, their production costs and quality is often far below what it cost to produce a reliable, quality product in the U.S. Why would the U.S. desire to purchase inferior imported products when it can buy locally and support it’s own economy?
The only people interested in importing inferior, low quality products are the CEOs and others who profit from selling inferior, low quality crap. As long as they get a large chunk of cash for importing and selling crap, they are happy to do so.
Jorge you make valid points. When I was into government sales and leasing, There was a submission of ones bid for supplying a governmental entity to the head office of the manufacturer. Depending on the urgency of the manufacturer to move metal the price could go up or down. Later it said that the dealerships government entity customer would be taken care of directly by the manufacturer. So much for dealerships and enhanced value. Sound familiar? My point you get down to it it just depends on what level that decision is made and for nearly all manufacturers not in the american market the smell of big money keeps them longingly wanting to play on the porch of the big dogs of the domestic market. Kind of the like getting end aisle space at the supermarket. You thought it y9u just had to have a great product. Then you find you have give a discount for coveted shelf space with a major distributor.
GM China, SAIC and Wuling Motors are creating a more affordable vehicle that will be marketed throughout SE Asia. This more inexpensive car will impact the emerging countries that will have a niche market worldwide seeking affordability.