Page last updated at 11:01 GMT, Monday, 7 December 2009

China car sales raise global stakes

By Jorn Madslien
Business reporter, BBC News

Traffic in Beijing
A vast home market has helped create large Chinese carmakers

China's car sales have soared this year, aided by tax cuts and other incentives aimed at promoting low-emission cars.

Sales in China are set to storm ahead next year too, though the annual growth rate is set to slip back to a more measured 10-15% from 40-50% growth in 2009 as the incentives are withdrawn.

The growth rate is already flattening after a peak in October when sales came in 66% higher than the same month last year.

This will give the industry a chance to take a breather. Demand for cars has risen so fast, many manufacturers have struggled to keep up.

The sales surge has made China the world's second-largest market for cars, after the US, where sales have slumped during the last couple of years.

Traffic in Delhi, India
Chinese carmakers are eyeing growth in India

Last year, less than nine million cars were sold in China. This is set to rise to between 12 and 13 million this year, and by 2015 it should have reached 16 million, research group JD Power predicts.

China has also stolen a march on India and Russia, where car sales are expected to surge in the near future, both in terms of growth in its home market and in terms of its capacity as a producer.

Overseas expansion

Rapid growth at home has helped create large Chinese companies, which are now eyeing the world.

Carmaker Beijing Automotive Industry Holding (BAIC) is in talks to buy Saab from General Motors, while Geely is set to buy Volvo Car from Ford.

But such deals are small fry when compared with Shanghai General Motors' decision, announced late last week, to expand into India.

Cars for sale in China
The Chinese market is attractive for foreign carmakers

The Indian car market is set to almost double from 1.7 million cars sold last year to 3.2 million in 2015, JD Power predicts.

In addition, Shanghai Automotive Industries (SAIC) has taken majority control of the venture, with its partner GM taking a back seat.

GM agreed to hand over control of the joint venture "to get their full cooperation and the full cooperation of the Chinese government in other things", according to Nick Reilly, the president of GM's international operations and the new head of GM Europe.

"It also helps us, obviously, share the large investment that is behind this program and therefore get it done faster."

Chinese in charge

For established carmakers in the West, hit with shrinking sales in their home markets, China will offer millions of new customers in the years ahead.

To take advantage of this, they are investing vast sums in production facilities in China, in many cases in partnerships with local companies.

In addition, Chinese carmakers are emerging as fierce competitors to established Western carmakers, both on their home turf and in emerging car markets.

Again, many of the established carmakers may be involved as partners in joint ventures, but increasingly they may find they are no longer in the driving seats.

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