China Becomes No. 2 Vehicle Market

The Associated Press
Thursday, January 11, 2007; 6:29 AM

BEIJING -- China surged past Japan to become the world's No. 2 vehicle market after the United States last year as car purchases by newly affluent drivers jumped 37 percent, the Chinese auto industry association said Thursday.

The announcement highlighted China's lightning evolution from a "bicycle kingdom" into a major auto market where foreign producers are racing to open factories and target a growing urban middle class.

Struggling U.S. automakers General Motors and Ford have gotten a boost from double-digit sales growth in China and fledgling Chinese manufacturers are starting to export their own cars, trucks and SUVs.

"There's money here and people spend that money on cars," said Michael J. Dunne, vice president for Asia-Pacific for auto research firm J.D. Power and Associates. "The Chinese government has made no secret of its intention to develop a car culture and a car industry. All of the forces are working together."

China's overall vehicle sales, including trucks and buses, rose 25.1 percent to 7.2 million units last year, China Association of Automobile Manufacturers said. Passenger car sales rose to 3.8 million, it said.

Japan's total vehicle sales last year came to 5.7 million units, a slight decline from 2005, said the Japan Automobile Manufacturers Association.

U.S. car and truck sales totaled 16.5 million units last year, down a bit from 2005, according to research firm Autodata Inc.

The Chinese car boom is driven by economic growth that is estimated to have reached 10.5 percent last year.

The officially endorsed car culture has changed the Chinese landscape almost overnight, with ancient city centers bulldozed to make way for broad avenues and the government spending heavily to build a nationwide highway network. Big cities are ringed by car dealerships. Fast food restaurants are opening drive-through windows.

The car craze has taken a toll in smog and congestion. China has most of the world's 10 dirtiest cities, and air quality is worsening as car exhaust increases. Rush-hour traffic slows to a crawl in Beijing, Shanghai and other urban centers.

China could overtake the United States as the top car market some time after 2015, Dunne said.

"It could happen," he said. "China's annual income per person is just over $1,000, and they're buying 7 million vehicles. Imagine what happens when that goes to $2,000 or $3,000."

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