China is now the second largest vehicle market in the world, with total sales of 5.92m vehicles in 2005, up 15% on 2004, according to the Shanghai Daily newspaper. China overtook Japan, which sold 5.82m vehicles and now only lags the US.
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The Chinese sales figure for 2006 includes 160,000 imports.
Total vehicle production reached 5.7m units, up 12.5% on a year earlier. 2.95m of these were cars, up 26.9% on a year earlier, according to the newspaper.
For 2006 Reuters reported that the China Association of Automobile Manufacturers (CAAM) is forecasting sales and production to grow 12%, slightly lower than in 2005.
However an executive of the Union of National Passenger Car Market Information, quoted in Shanghai Daily, is slightly more optimistic and expects growth in 2006 to match 2005’s growth of 15%. This means sales would reach 6.4m units..
A Deutsche Bank analyst quoted in the Shanghai Daily expects sales in 2006 to be fueled by a drop in the price of raw materials and strong demand from the growing middle classes.
High raw material prices and a price war in 2005 contributed to a decline in profit margins at Chinese vehicle manufacturers. According to the National Bureau of Statistics, the average profit margin in 2005 was 4%, well below the 6.86% recorded in 2004 and 9.11% in 2003. Profit margins are unlikely to reach 2003 levels again.
