Isn't it great when a plan comes together? A few months ago Beijing was fretting about an apparent collapse in demand for autos. Muted sales data – sales of passenger cars fell 35 per cent between March and August – suggested that China would be lucky to get anywhere near its target of shifting 10m vehicles in 2009.
Some pretty blunt instruments later – tax cuts and subsidies for smaller vehicles – and autos are flying off the forecourts. With 2.7m new vehicles shifted in the first quarter (up 4 per cent year on year), China has zoomed past the US (2.2m, down 38 per cent) as the world's largest market. At that run rate, Beijing will beat its 2009 target by early December. No wonder this week's Shanghai auto show is more festive than equivalent events in the west, which are being scaled back or canned altogether.
But delegates should keep some champagne on ice. Automakers are not necessarily looking at better profits: minivans mean mini-margins. Sales of vehicles with bigger engines are falling, as they are everywhere else. This year's overall improvement in sales is almost certainly linked to rampant credit growth, which the banking regulator last week said it was looking to tame. And the industry continues to grapple with structural demand problems. Take cars: sales growth averaged about 40 per cent a year in the six years to 2008, when annual growth slipped to 7 per cent. Even with the punchy start, 2009 is set for about 5 per cent, estimates Citi. For a country with third-world penetration – 32 cars per 1,000 people in 2007 (compared with 800 in the US) – that kind of growth is hardly spectacular.