China auto Mar12.pngIf something seems to be too good to be true, then it generally is. That appears to be the learning from China’s auto market in recent months.

February sales jumped, as the Lunar New Year holiday took place in January this year. But total sales in January/February were down 5% versus 2011 at 2.37m versus 2.5m.

This is quite different from the 2008 – 10 period when;

• Sales fell 4% in Q4 2008, as the Crisis hit China’s economy
• Then they jumped 53% in 2009, and 33% in 2010
• But this was only due to the government’s panic reaction
• It doubled bank lending, and added stimulus worth 13% of GDP

The blog has always argued this growth could not be sustained.

The reason is simple. 96% of China’s population earns less than $20/day, according to Asian Development Bank data. This means they would be living below the poverty line in any Western economy.

So cars are a luxury item for many people, and only really affordable when the government helps to pay the bill.