China has become the largest automotive market in the world, largely due to its stable economic growth, increased investments, and strong purchasing power of consumers in the country. To tap this lucrative market, vehicle original equipment manufacturers (OEMs) are expanding their production capacities and launching new vehicle models in the country.
New analysis from Frost & Sullivan, 2014 Automotive Outlook for China, finds that the sales volumes of passenger and light commercial vehicles stood at 21.98 million units in 2013 and is expected to go up to 35.19 million units in 2020.
"Vehicle OEMs have resorted to competitive pricing to stay afloat in the Chinese passenger vehicle market," said Frost & Sullivan Automotive & Transportation Research Analyst Chan Ming Lih. "They have managed to maintain competitive prices and lower manufacturing costs through joint ventures and collaborations between international and local vehicle OEMs."
However, the difficulties vehicle OEMs are facing in meeting varying consumer demands with respect to design, car engineering, electronic control system, and safety system is hampering market development. The market is also being pegged back by the threat posed by new entrants and the availability of substitute vehicles.
The other issues slowing down growth are the high levels of traffic congestion and shortage of parking spaces across China and the saturation of the passenger vehicle market in tier one and tier two cities.
"To overcome these challenges, Chinese automakers are strengthening their presence in tier three cities, where passenger vehicle sales are growing steadily," noted Lih. "They are also looking to expand their dealership networks beyond central, populous regions and states in order to increase customer reach."
In addition, vehicle OEMs are focusing on innovation to improve the quality of passenger vehicles and meet consumer demand for better ideas and more product features. They are also taking advantage of the increasing urbanization and modernization in China to boost their market share and remain competitive.
2014 Automotive Outlook for China is part of the Automotive & Transportation (automotive.frost.com) Growth Partnership Service program. Frost & Sullivan's related studies include: Strategic Outlook of Global Electric Vehicle Market in 2014, Strategic Outlook of Commercial Vehicles Telematics in 2014, 2014 Global Powertrain Outlook, and 2014 Outlook of Global Commercial Truck Industry. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
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2014 Automotive Outlook for China / P7E3-18