My pessimism grows each day about the Chinese market's prospects in 2009.
In 2007, auto sales grew 22 percent, but slowed to about 7 percent last year. Market research firms such as CSM Worldwide and Global Insight predict the growth rate in 2009 will be around 5 percent.
But as the economic situation stands in China, the auto market is likely to end the year with no growth at all. Automakers should brace for a particularly tough 2009.
I am pessimistic for two reasons. The first is the deepening economic woes in China.
The economic growth rate in the third quarter of 2008 dropped to 9 percent. The rate for the fourth quarter is not available, but there are signs that it is heading south.
More people are losing jobs. The latest survey conducted by the Chinese Academy of Social Sciences, an official think-tank, shows the unemployment rate in urban areas is above 9 percent.
The second is that unlike the situation in America, a car remains a nice-to-have, not a must-have, to average Chinese people.
According to official statistics, the average disposable income of urban residents in China was about 14,000 yuan ($2,050) in 2007. Their cousins in the countryside only earned about one-third of that.
By contrast, even an ordinary compact car like a Ford Focus in China now still costs above 100,000 yuan ($14,600). An urban resident has to save for seven years to buy a car.
It is true the recent policy measures the government has taken will help the domestic auto market to achieve sustainable growth in the long term. These measures include cancelling road maintenance fees and offering tax incentives for people driving small cars. But their effects in boosting auto sales in the near term will be limited.
Cars are still seen as a luxury in China, and during down times, people avoid unnecessary purchases. This explains why auto sales growth has been decreasing much faster than the general economy.
According to Sinotrust, a Beijing-based market research company, domestic auto sales growth in the first quarter of 2008 reached 21.8 percent, but it quickly dropped to 15.4 percent in the second quarter and then fell 1.9 percent in the third quarter.
Despite decades of economic prosperity, China still heavily relies on exports for growth. With the world deep in recession, it will take quite a while for the Chinese economy to regain growth momentum.
Until the domestic economy starts recovering, it is hard to persuade Chinese consumers to buy cars, big or small.