On the Road to Profits in China's Auto Sector

 By: George Leong
Ever wonder how many cars are on the road in China? The estimates vary, ranging from 25 million to over 100 million. It seems no one really knows.

The Chinese auto sector had been sizzling, even overtaking the U.S. as the biggest car market in the world. With a middle class of over 300 million in a rapidly expanding Chinese economy, buying a car is paramount to the Chinese. However, the growth has been on the decline this year, as the government ended its tax incentives and jacked up taxes in order to streamline the number of new cars hitting the already clogged Chinese roads.

The Chinese car market grew 32% in 2010, but is estimated to falter to a mere three to five percent this year, according to the State Information Center.

So, while the Chinese auto sector will stall, it is clearly not dead. The demand for cars continues to be extremely high, as income levels continue to rise.

The key in China will be the rapid growth of the country's middle class. Credit Suisse predicted that the household wealth in China will double to $35.0 trillion by around 2015 based on achieving sustainable GDP growth at or near the current growth rate.

I have been a big supporter of the Chinese auto sector. Yes, the sector has slowed, but the massive potential is just too great to ignore. If you are patient, you need to have some capital in some of the Chinese auto-parts stocks or a play via U.S. automakers.

A lower-risk play on China's auto sector is General Motors Company (NYSE/GM). (Note that this is not a recommendation to buy the stock, but just an example to give you an idea of your options in this area.)

If you want to play via an U.S. automaker for less risk, General Motors is the top auto seller in China. GM and its Chinese partners (SAIC Motor and FAW Group) sold 2.35 million vehicles in 2010, well above the company's U.S. sales. The automaker is focusing its growth in China, as it feels the steady rise in the middle class will drive the demand for cars. GM will invest a minimum of $5.0 billion in China to try to reach a sales target of five million vehicles by 2015.

There is clearly some slowing in the Chinese auto market, but I view dips as an opportunity to buy for those with a longer-term view.

Consider that only about 41 in 1,000 Chinese own vehicles, according to some industry pundits. There is clearly ample room for growth, especially as the income levels continue to rise. This fact will drive vehicle sales going forward to the point where China will likely remain the top auto market in the world.

There are numerous ways to play the Chinese auto sector. You can buy an auto company on an American stock market with exposure to China, such as the major global automakers, as I discussed. Alternatively, you can buy Chinese auto-parts makers. Some interesting Chinese auto plays include China Automotive Systems, Inc. (NASDAQ/CAAS), Wonder Auto Technology, Inc. (NASDAQ/WATG), and SORL Auto Parts, Inc. (NASDAQ/SORL). Again, these are examples, not buy recommendations.
Artice Source: http://www.articlesphere.com

Related Articles in Automotives

People interested in the above article are also interested in the related articles listed below:

In the US, the windshields replacement industry is big business. You should strive to understand a few of the replacement and repair resins that are for sale on the market. In the event that your windshield is broken, you should undertake replacement or repairs as quickly as possible as auto windshield replacement and repair is about the safety from the vehicle owner along with other road users.
Most fleet managers know that vehicle maintenance takes two forms: Scheduled and Unscheduled. In the same way that regularly scheduled health checkups can detect and fix minor medical problems before they become big ones, scheduled preventive maintenance can help prevent, detect, and repair small problems before they become serious and expensive issues.
Vehicle maintenance and management are one of the most critical issue that we tend to deal with each day. Car glass if the most vulnerable element of the vehicle that is subjected to increased risk of breakage. For the instant repairs of the car glass it is essential that you hire the experts who can help you with the efficient repairing and repair of glass.

More in Automotives

Excellent, Larry. Thank you for taking the new article directory technology and making it work to the max. I encourage everyone to keep contributing and contributing regularly. I can attest to the fact that this site is already a strong directory in a field of many. Kudos to Larry!

Matthew C. Keegan
The Article Writer


I find it a delight to use both as an author and a publisher. It is full of nice little surprises that make the whole process of writing, reading and publishing articles a complete delight. This is one that comes out tops and beats the rest hands down.

Eric Garner
Managing Director


I did a Google search and came across your site. It was exactly what I was looking for and was elated to find such a broad range of articles. As I am launching a free magazine in a small town in Florida, I wanted to be as resourceful as possible while still being able to provide some content that is interesting and well written. Your site has all the variables in the mix. Excellent Site hitting all the notes in the scale sort of speak.

Mo Montana
Florida, USA

Article Topics

Copyright © 2005 - by Larry Lim, Singapore - Article Search Engine Directory at ArticleSphere.com™
All Rights Reserved Worldwide. All Trademarks and Servicemarks are the property of the respective owners.
ArabicBulgarianCatalanChinese (Simplified)Chinese (Traditional)CzechDanishDutchEnglishEstonianFinnishFrenchGermanGreekHaitian CreoleHebrewHindiHungarianIndonesianItalianJapaneseKoreanLatvianLithuanianNorwegianPersianPolishPortugueseRomanianRussianSlovakSlovenianSpanishSwedishThaiTurkishUkranianVietnamese