No Auto Industry Recession In China (GM)(TM)(HMC)

If only US car companies could do all of their business in China. The economy there must be better than has been reported. In March, a record 1.1 million light vehicles left showrooms. That means that more cars were sold in China during the month than were sold in the US.

According to the AP, “China is bound to eventually overtake the U.S. as the world’s largest auto market, and recent developments have accelerated that trend.”

Aside from indicating that the Chinese economy is not moving into a recession, the success of the industry makes it more likely that the world’s most populous nation could become a large exporter of cars. China must be continuing to expand its auto manufacturing capacity to keep up with demand. Joint ventures with US companies, particularly GM (GM), have brought The Big Three additional sales outside the US, but the local car companies in China have used the relationships to learn American product design and quality control skills.

China’s auto industry is now probably growing at a better pace than the Japanese sector did in the 1970s and 1980s. The sharp improvement in demand for vehicles in Japan allowed it to build the capacity and products to export cars to the US. Toyota (TM) and Honda (HMC) are now among the five largest car companies in America.

Now, the Chinese are coming.

Douglas A. McIntyre