China has become the second largest vehicle market after the United States.
AS CHINA steers its way into the 21st century, the bicycle kingdom of yore has given way to the reign of the car. According to a report by the Chinese auto industry association released in January, China has surged past Japan to become the world's second largest vehicle market after the United States.
As of November 2006, Beijing alone had 2.85 million automobiles crawling around the city's avenues, often stuck in bumper-to-bumper gridlock. The capital currently adds around 1000 cars to its total every day. In Shanghai, bicycles were banned all together from larger avenues as far back as 2004: an acknowledgement of the growing weight of the car in China.
According to state media, it took 48 years for the one million car mark to be reached in Beijing. By contrast, the second million mark was zoomed to in just six years. Last year China's overall vehicle sales, including trucks and buses, rose by 25 per cent to 7.2 million units. Passenger car sales alone increased to 3.8 million.
These figures are all the more vertiginous if one takes into account the fact that prior to 1980, the sole buyer of vehicles was the state. As recently as 1998 more than two-thirds of car purchases in China were made by government institutions. Paralleling the rise of greater individual economic and social freedoms, by 2004, 65 per cent of purchases were directly made by private individuals or families. Two million of Beijing's cars are estimated to be privately owned.
China's four-wheeled destiny is on display at the swanky Volkswagen showroom in its capital's central Wangfujing shopping district, which even on a Tuesday afternoon is buzzing with well-heeled visitors. According to Carrie Dong the showroom's manager, at least a 1000 people drop by daily to check out models such as the new Beetle, the Passat, and the Touareg. On weekends this number increases to 2,500, she says.
Ms. Carrie, is currently saving up herself to buy a car. Her dream is to own an SUV like the Touarag which comes with a weighty price tag of RMB 920,000 ($112,195). For her an SUV would bring "wild experiences," involving off-roading trips on the city's outskirts, which would give her a "break from daily life."
Until the 1990s, travel within China was restricted. Formal permission from a state employer was needed to buy plane tickets or soft sleeper train berths. The easing of restrictions on mobility, coupled with the increasing affordability of the car means that automobile ownership has deep psychological implications.
X Car is an Internet portal that provides its members with a forum to swap advice and information on their cars. The company's general manager Zhang Jing Qiu recalls that when he first set up the portal in 2002, it had 10-12 members. Within three months, the membership soared to 10,000 and today the website boasts over 350,000 registered users. The members are mostly aged between 25 and 35 and are from white-collar backgrounds particularly from the IT, media, and finance sectors.
According to Mr. Zhang, for the average member of his organisation, a car represents freedom and the ability to control one's environment. "For decades people here had almost no choice, they were powerless. A car gives you choice and power," he says.
China has, in fact, emerged as the saviour of U.S. automakers General Motors (GM) and Ford who are struggling in their home markets but have received a boost from double-digit sales growth in China. In 2005, for example, GM saw its China sales rise by 35 per cent. The German company Volkswagen announced this week that its 2006 sales in China had climbed by over 24 per cent.
Moreover, it's not only middle-range car manufacturers that are enjoying a bonanza time in China. BMW sold 23,600 cars in China in 2005, 50 per cent more than in 2004.
Bentley's Beijing dealership has sold half a dozen $1.2 million Mulliner 728 limousines, the most expensive car in the world, more than any other dealership in the world. Porsche sold 857 cars in 2005 and while the figures for 2006 are not yet available, the number is expected to have doubled.
China's appetite for luxury cars the country is, in fact, expected to emerge as the largest luxury car market in the world within the next decade is a reflection of changing attitudes towards wealth.
Less than 30 years after China's economic reforms began, wealth has gone from being a dirty word to a sign of success and source of envy. During the Cultural Revolution (1968-78) those with money were humiliated and punished as class enemies. The consequent mentality persisted into the early years of the reform era, so that even as wily entrepreneurs amassed fabulous riches, there was a deep reluctance to flaunt this money. Wealth remained tainted with the whiff of the unsavoury.
It is only now, in the middle half of the new century's first decade that money is losing that whiff and acquiring instead an alluring perfume. China's new rich have begun to come out of the closet en masse and they have one thing in common: money and the desire to spend it.
But the implications of China's love affair with the car are not confined to its own borders. They have global repercussions for industry, environment, and energy.
Not only is China rescuing the fortunes of the beleaguered car companies of the west but fledgling Chinese manufacturers are starting to export their own cars, trucks, and SUVs, a development that has industry analysts agog with expectation. However, the news for the environment is less buoyant. According to the World Health Organisation, China has seven of the world's ten most polluted cities. In cities like Shanghai, automobiles account for 70 to 80 per cent of air pollution.
The car is also leading to enormous increases in China's already voracious appetite for energy. Ten years ago, gasoline for cars made up around 10 per cent of China's demand for oil. By the end of the current decade it is predicted that gasoline will make up more than two-fifths of China's total oil demand, according to the Development Research Centre for China's State Council.
Notwithstanding these problems, X Car's Mr. Zhang declares that the only direction China's car sales are going to go is up. Car ownership in China is still tiny in per capita terms. Only 8 or 9 out of every 1000 persons own a car in China as opposed to a global average of 128 per 1000 persons.
Carrie Dong, the manager of the Volkswagen showroom, says with a defiant toss of the head, "I know the roads are getting really congested, but that's something the government needs to solve. I still want my own car."