China’s Automotive Market
February 2014
A Bumpy Ride Ahead? – How automotive OEMs can plan for a smoother journey

Based on in-depth market insight and a long track record of delivering strategic projects for major automotive companies in China, Arthur D. Little assesses the outlook for the Chinese automotive market and identifies five key topics that should be on the CEO agenda for any international automotive OEM doing business in China.

Market outlook: growth, challenge and risk

Is growth in the Chinese car market sustainable?

In the twelfth five-year plan agreed by the National People’s Congress in March 2011, China plans to reduce average annual growth in GDP from 7,5% to 7% over the next five years. This rate of growth is still considerable compared with the European Union which forecasts average growth of 2% p.a. until 2020. Additionally, for the first time, the Chinese five-year plan sets a CO2 reduction target (-17% per unit of GDP). Arthur D. Little anticipates that the Chinese automotive market will experience growth of 15% p.a. for the next three to four years, with growth in market volume slowing down between 2013 and 2015 to 7% p.a. as shown in figure 1. Over the next four years, local automotive brands are likely to increase their market share, although we expect that there will be significant opportunities for international automotive OEMs too. As the market matures there will be a change in the ratio of first-time to second-time car purchasers. Today, about 80% of customers are first-time purchasers; by 2019, there will be more second-time purchasers than first-time purchasers. Current market growth is fueled primarily by first-time car purchasers so growth is likely to decelerate in the medium term.