United States Overrun By China

Bertel Schmitt
by Bertel Schmitt

Never has the term “Red China” been more appropriate than in the last month. The U.S. is staring into China’s taillights. In January, the unthinkable happened. China dethroned the United States as the world’s largest car market. Not for the year. For one month only—so far. Even the biggest optimists (or pessimists, depending how you look at it) didn’t expect (fear) that China would outsell the U.S. before 2015.

The story unraveled during GM’s monthly sales call on Monday. Michael DiGiovanni, GM’s executive director of global market and industry analysis, dropped the remark that an estimated 790,000 vehicles were sold in China in January. Total U.S. sales in January were about 668,000, DiGiovanni estimated. Automotive News [sub] thinks Di Giovanni is an optimist. According to their tally, 656,881 vehicles were sold in January. DiGiovanni’s Chinese number was even news to China, where official counts are not yet available.

“This is the first time in history that China has passed the U.S. in monthly sales,” DiGiovanni said. “We are estimating that China is going to come in at 10.7 million seasonally adjusted annual rate in January. The U.S. industry, we estimate at about 9.8 million SAAR.”

What happened?


U.S. auto sales dropped 37.1 percent in January. Chinese sales grew—how much will be unclear until official numbers are released. As reported a few days ago, some Chinese car makers, especially those catering to the smaller segments, report double digit growth rates for January.

Financial Times jumped on the story also opining that Di Giovanni may be an optimist: “Autodata, a market research firm, put total estimated annual industry car sales at 9.6m, their lowest level since 1982.” According to FT, “the slump came in spite of generous incentives offered by carmakers last month, including employee pricing deals, and an infusion of federal cash to the carmakers’ lending arms. GMAC and Chrysler Financial are accessing a total of $7.5bn of troubled asset funds.” In other words: Even a megadosis of heavy drugs couldn’t save the U.S. from being overtaken by the Yellow Peril. The Chinese side did comparatively little to stimulate growth. China cut the sales tax in half on cars less than 1.6 liters—which came in effect January 20th, too late to have a considerable impact before China closed for the Spring Festival in the last week of January.

Despite an economic downturn, China reports strong retail sales for January, and China’s government announced that the worst may already be over. U.S. carmakers are less optimistic. “Today we’re at the vortex of the economic downturn, and it’s difficult to talk about recovery,” said Emily Kolinski Morris, Ford’s senior economist. Only after looking really long and hard, she found “some faint signals emerging that we may be nearing the bottom.” GM’s DiGiovanni said he believes US car sales would exceed China’s for the full year of 2009, “although China’s could be higher if the US stimulus package was less effective than hoped.” Message from GM to DC: Keep the bailout money coming if you don’t want to be overrun by China. Which may be the reason why GM released the numbers before they are officially available in China.

A word of caution: China counts “motor vehicles” different that the U.S. Anything with wheels and an engine—motorbikes, tricycles, cars, trucks—qualifies. The “light vehicle” count is unknown in China. Which shouldn’t be news to an executive director of global market and industry analysis of the world’s second largest automaker. Did he overlook that little detail intentionally to rattle Washington?

Be that as it may, sooner than later, China is bound to outclass the U.S. of A. It’s sheer numbers. Whereas the US has an obscene number of 760 cars per thousand, China only has 30 to 40, depending on which statistics you rely on. China has unlimited room to grow, while the U.S. will need at least 5 years to get out of its housing and credit morass.

PS: According to Financial Times, “Asia’s carmakers led a rally across the region’s stock markets as figures showed they outsold their American rivals to account for just under half of sales in January in the US, the world’s biggest vehicle market. Signs that China’s stimulus package may be starting to work provided another fillip to shares.” They forgot to stick in “formerly biggest.”

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Obbop Obbop on Feb 05, 2009

    Oh yeah? Well, my American junior high drop-out kid can whip your China honor roll kid any day of the week except Sunday when my kid is in the basement all day playing video games.

  • Joeaverage Joeaverage on Feb 05, 2009

    Have you seen the YouTube video where somebody plays with statistics and figures that since some tiny percentage of any population are geniuses that there are more Chinese geniuses than American geniuses? Sobering thoughts. Whatever the case I think it is time to quit celebrating the idiot entertainers and pumped up athletes and start celebrating the kids who excel at the sciences. You know - the football jock isn't as big a deal as the academic bowl kids! Plenty of good things the science kids can work at in America. Still PLENTY of things that could be refined and redeveloped. Transportation is certainly one of them. Two tons of car to haul 250 lbs of human? Seriously?

  • W Conrad Sedans have been fine for me, but I were getting a new car, it would be an SUV. Not only because less sedans available, but I can't see around them in my sedan!
  • Slavuta More hatchbacks
  • ED I don't know what GM is thinking.I have a 2020 one nice vehicle.Got rid of Camaro and was going to buy one.Probably won't buy another GM product.Get rid of all the head honchos at GM.This company is a bunch of cheapskates building junk that no one wants.
  • Lostjr Sedans have been made less practical, with low rooflines and steeply raked A pillars. It makes them harder to get in and out of. Probably harder to put a kid in a child seat. Sedans used to be more family oriented.
  • Bob Funny how Oldsmobile was offering a GPS system to help if you were lost, yet GM as a company was very lost. Not really sure that they are not still lost. They make hideous looking trucks, Cadillac is a crappy Chevy pretending to be fancy. To be honest, I would never step in a GM show room now or ever. Boring, cheap ugly and bad resale why bother. I get enough of GM when i rent on trips from airports. I have to say, does anybody at GM ever drive what everyone else drives? Do they ever then look at what crap they put out in style fit and finish? Come on, for real, do they? Cadillac updated slogan should be " sub standard of the 3rd world", or " almost as good as Tata motors". Enough said.
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