In January, China’s auto sales for the first time in history exceeded America’s, making China the world’s largest auto market for the month. As we said, sooner than later, China is bound to outclass the US of A solidly. Xu Changming, director of China’s economic consultative center under the State Information Center, thinks that it is quite possible that China will overtake the United States as the World No.1 car market for all of 2009: “Chinese auto sales are expected to grow 4 percent to 5 percent from 9.38 million units sold last year, more than the estimated 9 million unit sales in the U.S. this year.”

“But this figure is not something we should feel proud of since the U.S. was just plunged into an economic recession,” Xu warns according to Gasgoo. “Once the recession ends, America can retake the sales crown by selling 16 million–17 million vehicles annually.” So even if China takes the crown this year, they might lose it, and then “China still needs at least four to five years to eventually catch up with the U.S. in the auto sales total,” said Xu. And he has reason for caution . . .
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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?
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For a long time, the Chinese car market looked more like the American and less like the European markets. They liked big, they liked SUVs, they liked real cars with a trunk. For a long time, hatchbacks and subcompacts were unsalable in China. Last year, the picture changed. More and more low cost subcompacts are getting on Chinese roads.

“In China, new-car sales last year rose just 6.7 percent to 9.38m units, slamming the brakes on the market’s double-digit growth. Nonetheless, a batch of automakers enjoyed nearly 30 percent jumps in sales,” the Nikkei (sub) writes. And who might those be?

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For months, TTAC followed the increasingly desperate attempts of Ford to sell Volvo to the highest, and, as time went on, to any bidder. We reported that Ford’s Volvo joint venture in China, Changan, along with the Indian company Mahindra and Mahindra were in talks about Volvo. Which led to nothing. We reported that China’s Geely was looking at buying Volvo. Which led to nothing. We reported that Daimler isn’t interested in Volvo, and neither is BMW. Everybody in the auto business knows that Volvo is for sale. Everybody, except Ford. For a long time, everything was denied in Dearborn. Last December, Mulally raised Ford’s skirt a little bit for a peek at the no longer very private parts and said that Ford “is considering strategic options.” Whatever those may be. Now, after there is not a soul left that doesn’t know that Volvo is for sale, Bloomberg reports that Volvo is for sale:
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In the olden days, the headquarter markets got all the new toys first. Joint ventures and subsidiaries abroad had to wait a whole generation, until tooling, machinery, sometimes whole assembly lines were crated up and shipped abroad. Especially in China, this had attracted criticism, as in “we don’t want your hand-me downs.” With computer aided manufacturing and robots, the introduction of new models to other markets was sped up significantly. Now, China can’t complain anymore. This week. Ford China started manufacturing the seventh Generation Fiesta subcompact at their Nanjing plant, only months after the first cars had hit the market in Germany last October. Nanjing is the second plant in the world to build the car. In China, the Fiesta will go on sale late in the first quarter. The Fiesta was shown at the North American International Auto Show in 2007 under the name, “The Verve,” but Americans will have to wait until 2010 before they can buy it domestically. In Europe, they can’t make enough of the little guy.

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Jimmy Wong of Hong Kong spent six months and untold fortunes converting his 2002 Lotus Elise to an all-carbon fiber body. The result? About 80 pounds of saved weight. Life’s tough on the bleeding edge.

As much as U.S. automakers, especially GM, rely on China to bolster their global sales numbers and to supply cheap parts, Detroit is scared excrementless that the Chinese may apply the Western technology which had been exported to their shores, and sell cheap cars in the U.S. So far, it hasn’t happened. But it’s happening in America’s underbelly and NAFTA partner Mexico. “FAW Group Corp., one of China’s three largest domestic auto manufacturers, has begun selling new cars for as little as $6,550 in Mexico in what is believed to be the first foray by a Chinese auto-maker into North America,” Canada’s Financial Post reports. This being a Canadian paper, they are probably talking Canadian dollars, so in real money, it would be $5550. Or more like $4999. Scary.

A boatload of about 6,000 FAW cars have been brought to Mexico by Grupo Salinas, a specialty retailer. “They’re not all sold,” company spokesman Daniel McCosh said. “The higher-end and the lower-end vehicles are moving better than the mid-priced models.” That Mexican beachhead is troubling news for Detroit.
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China’s Passenger Car Association released their numbers for the year. For China, which was used to double digit growth, they are disappointing. Other markets, such as the U.S. would die for them. China’s full year passenger car sales rose 7.4 percent in 2008, the Association says.

Before we delve into them, be warned about Chinese numbers. China doesn’t have a “light vehicle” category. Vans or minivans, such as the GM-Wuling offerings, are counted as “commercial vehicles,” and are not in China’s passenger vehicle count. Also, to understand the market, one must be aware of China’s wild and woolly joint venture situation where cars of the same brand are made by different and often competing companies, and sold through different dealer networks.

Here are the top 10 Chinese passenger vehicle sales as Gasgoo reports them. These are real sales, not cars dumped on dealer’s lots. These are government numbers, based on cars that have been registered by owners and issued license plates. However, they count factories. They don’t count brands.

1. FAW VW: 498,867 units
2. Shanghai VW: 490,087 units
3. Shanghai GM: 468,642 units
4. FAW Toyota: 365,699 units
5. Chery: 356,092 units
6. Dongfeng Nissan: 350,621 units
7. GAC Honda: 305,997 units
8. Beijing Hyundai: 294,517 units
9. Geely: 230,420 units
10. Changan Ford: 202,797 units

Now for a closer view:
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The Hong Kong Stock Exchange announced that the board of directors of Brilliance China Automotive Holdings Limited ” has noted the increase in share price and trading volume of the shares of the Company today and wishes to state that the Board is not aware of any reasons for such increase in share price and trading volume.”

Brilliance, BMW’s Chinese joint venture partner and maker of its own line of cars (which kind of look like Bimmers) “confirms that there are no negotiations or agreements relating to intended acquisitions or realizations which are discloseable.” In other words: They say they have no idea why their stock would move.

We called around a bit in China. Everybody is likewise flabbergasted. A source we trust, and which shall remain undisclosed to protect his job, says: “There is nothing unusual going on at Brilliance. They will announce some homegrown new models this year. No new BMW joint venture cars are planned.” So why the sudden interest in their stock?

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On Monday, the German magazine Der Spiegel will report that Daimler had looked at taking Volvo off Ford’s hands. But after trying Volvo on for size, the good folks in Stuttgart decided it’s not a good fit. “Daimler boss Dieter Spiegel has carried out a close examination of a possible purchase in the past few weeks and acknowledged a series of possible drawbacks,” the German weekly will say. According to Der Spiegel, Daimler scoffed at problems with harmonizing Volvo with its own Mercedes cars. The article is not even out yet, and it has already been shot down by a missive from Stuttgart. Two days before the report was to appear, Daimler said it’s a fabrication. “We were never interested in Volvo,” a Daimler spokesman said to Reuters. Not interested doesn’t mean they didn’t look.
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It got a little quiet recently about Chinese automakers ogling American automakers-in-distress. London’s Financial Times (sub) decided it’s time to rekindle the flames. “China is the world’s second-largest car market,” the pink sheet writes today, “and rumors swirl ceaselessly about a Chinese carmaker buying Chrysler or General Motors. It is a remarkable transformation and one that cannot be halted, even by the global economic recession.” After waxing prose about the end of the “stratospheric double-digit growth of recent years,” and snidely remarking that “industry analysts are still expecting high single-digit growth for 2008 and possibly 2009 as well. Much of the rest of the global car industry would be happy to see such numbers,” the FT gets right to the point:

“No one expects the Chinese government to step in with a Washington-style bail-out, but last month Chery announced that it had arranged RMB10b ($1.46b) in financing from China’s Export Import Bank to fund overseas activities, and then immediately said it was calling off a small-car partnership with Chrysler – fueling speculation that Chery’s real intent was to buy the troubled US carmaker.”

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Bankrupt United States car parts maker Delphi has decided to temporarily close a plant in China’s Suzhou, the Hong Kong’s South China Morning Post (sub) reports. The factory west of Shanghai makes compressors for General Motors Corp. Delphi had been spun off from GM, as Visteon was from Ford, and Denso from Toyota. All with the (at least official) idea to supply other automakers of the world as well.

Unfortunately, it didn’t work out that way for the Suzhou plant: “The sudden and unprecedented decline in car sales globally has resulted in our only customer, General Motors North America, announcing plant closures and plant stoppages,” the South China Morning Post quoted from a statement by Delphi. “Unfortunately our only customer in 2009 is GMNA, and this has placed the Suzhou compressor plant in a very dangerous position,” the document continues.
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After Taiwan’s Yulon Motor pays a symbolic Taiwan dollar for the 49 percent stake General Motors holds in their local joint venture Yulon General Motors, GM will give them the keys, and say bye-bye for good, reports the Dow Jones News Wire via CNN Money.

Yulon, like many other car companies, needs cash. GM doesn’t have it, so they decided, to heck with Taiwan, it’s not worth the hassle, we’re outta here. Or in the more proper words of F.J. Pan, the CEO of the former joint venture: “Yulon General Motors needs a fund injection to cover losses and develop business, and General Motors has cash flow problems, so they said they don’t plan to inject funds,”

For long, Yulon was more known for flooding the island with rebadged Nissans. In 2004, Yulon split itself in two entities to allow a dalliance with another joint venture partner.

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China is sick and tired of the bad crash test rap their cars receive abroad. Many of them, a few years ago, were really bad. To remedy this, China established their own Automotive Technology and Research Center (CATARC) in Tianjin, which smashes new cars for a living. The standard they use is the Chinese New Car Assessment Program, or C-NCAP. According to China Daily, C-NCAP “is similar to Euro-NCAP.”

Gasgoo reports now that “China’s domestically made cars are making progress in terms of safety.” Homegrown Chery A3 (shown in the video) and SAIC’s sortof homegrown Roewe 550 received five stars at CATARC. Six stars would be best, and so far, only one, the Hongqi, received top honors earlier this year.

Amongst the joint ventures, the China-made Mercedes-Benz C200, and FAW-VW’s New Bora also received five stars.

The Chinese are quick studies: In the two years the center has been in operations, the proportion of five-star cars rose from a horrendously low 8.3 percent in 2006 to 36 percent in 2007 and to 46 percent in 2008. Still, in 2008, more than 30 percent of all tested models limped out of the testing lab with only two or three-stars.

Now, “similar to Euro-NCAP” isn’t “same as.” The devil is in the details, especially in crash testing. We’ll see how they fare with a Euro-NCAP, which will be much tougher in 2009.