SHANGHAI -- We know auto sales in China this year will likely total 13 million units, since 11 million units have already been sold in the first 10 months. As for 2010, several auto companies including GM China are predicting sales growth of about 10 percent.
But what about after that?
Earlier this month I received two research reports on the future of China's passenger vehicle market, for as far off as the next 20 years.
Car Study China is published by the European consultancy Malik Management. China Passenger Vehicles, meanwhile, has been put together by the investment bank UBS Securities.
Each paints its own plausible scenario. Yet to my mind, the predictions of both are marred by a common oversight.
Here are their key findings:
Malik believes car sales growth in China will slow to about 10 percent annually over the next 10 years. From 2025 onwards the market will flatten, reaching saturation at some 300 million cars in 2030.
That means only 200 in every 1,000 people in China will eventually own a car. This is a much lower proportion than the 600 to 700 per 1,000 people seen in mature Western markets today.
While UBS doesn't give a date for saturation, its report predicts a penetration exceeding 150 vehicles per 1,000 people by 2030. This assumes average real GDP growth of 6 percent to 8 percent, and translates into a total of 222 million units.
Given that the ownership rate in log-jammed Beijing is now about 150 units per 1,000, even UBS's lower estimate is not a very appetizing one. Imagine every city in the country being like the capital today!
In addition to giving numbers, both reports opine that government stimuli can only boost market demand in the short term. "The only impact of such policies is to shift short-term demand between time periods but have no effect on the final car population," says the Malik report.
Here I agree completely. Government stimuli, especially tax cuts on small cars, have unleashed demand suppressed last year. But they have also consumed purchasing power that would otherwise have been spent in future. That suggests we'll see slower auto sales growth in 2010.
Now to where I disagree.
The methodology followed by each report draws on a wide array of influences affecting auto demand in China, from economic growth to government policies. But neither report, in my opinion, gives due consideration to the effect of new technology.
Many breakthroughs are likely over the next two decades. Their influence could be profound.
Electric cars, for example, are prohibitively expensive today. Yet given advances, they could become affordable to the mass of consumers tomorrow.
If that were to happen, the many millions of people riding electric bicycles could switch to electric cars. That would boost vehicle ownership to a level that is now unimaginable.