Booming auto sales in emerging markets lure world carmakers: S&P

Booming auto sales in the emerging markets of China and India are offering huge growth potential to the largely saturated global car market, said a report published by Standard and Poor's Rating Services on Wednesday.

"We expect an average growth in car sales in China of at least 10 percent to 15 percent per year over the medium term," said Standard & Poor's credit analyst Maria Bissinger, author of the report entitled "Dream Machines: Emerging Markets Beckon the World 's Carmakers."

She said "in India, market forecast a growth rate of about 10 percent to 12 percent in 2006, matching long-term economic growth expectations in the country," she added.

This will be supported by increasing purchasing power in these two countries, in which currently fewer than 10 percent in 1,000 driving-age inhabitants own a car. GDP is forecast to grow by 5.5 percent year in India and 5.2 percent year in China between 2006 and 2020, the report said.

On a lower level, the emerging Russian car market is also attractive to global automakers after seeing growth of 7 percent to 8 percent since 2000.

Every major international manufacturer is now present in the Chinese market, in which more than 100 auto manufacturers currently compete, the report said. As well as imports, international automakers are increasing setting up local assembly and production plants, generally in conjunction with domestic joint-venture partners.

Germany's Volkswagen AG, the first foreign carmaker into the Chinese market nearly 20 years ago, still narrowly retains its leading share. It is followed closely by General Motors Corp., which currently has six joint ventures, and is increasing its production capacity.

The Western automakers' move eastward is changing the landscape of global auto production, the report said. Although three- quarters of vehicles are manufactured in the three key production regions of North America, Western Europe, and Japan, China has now overtaken South Korea and France to become the fourth-largest auto manufacturer in the world.

The report concludes that, as the new Eastern markets eventually consolidate, the strongest domestic players will be best placed not just to anchor their home market positions but also to put pressure on Western markets through exports and the establishment of production capacities as indicated by Chinese automakers' plans to build plants in Eastern European in the next five years.

Source: Xinhua