China's auto industry booms amid challenges

BOAO, Hainan - China's automobile industry is booming on the back of strong domestic demand, but challenges remain due to a spate of governmental and environmental factors, experts warned.

At the ongoing Boao Forum for Asia, held this year from April 8 to April 11 in South China's Hainan province, industry insiders said that solid market growth might mask a host of problems in the country's auto industry.

Big demand in China has powered the past decade of explosive growth in car sales, but the industry is grappling with a thicket of problems, including environmental woes, traffic congestion, government restrictions on car purchases and odd-even car bans, said Zhu Fushou, General Manager of Dongfeng Motor Corporation.

"It is debatable whether the sector could sustain growth in the midst of these factors," Zhu said.

BOOMING MARKET

China's car market has been credited with helping boost the world's car sales thanks to huge domestic demand.

According to official data, car sales in China surged by 13.9 percent in 2013, reaching 21.98 million units, giving the automobile industry a much-needed boost after two years of slow growth. The headline rate also helped China secure the world's top spot in car sales for the fifth consecutive year since 2009.

Xu Heyi, General Manager of Beijing Automotive Group Co., Ltd., said that China's auto industry is still in the initial stages of development from an international market perspective.

"The domestic market will not peak until its annual sales and capacity reach between 30 million to 35 million units, respectively," Xu said.

Last year's performance has fueled high expectations, and a slew of major car manufacturers have set ambitious targets hoping to reach a double-digit growth rate. Changan Mazda Automobile Company, Ltd., for instance, expects to sell 100,000 units in China in 2014, which would be a 40 percent increase from last year.

China's auto sales could witness growth of eight to ten percentage points this year, particularly the sales of sports utility vehicles (SUVs)and multi-purpose vehicles (MPVs), according to a forecast by the China Association of Automobile Manufacturers.