China's Lower Tiers Offer Vast Potential for Auto Market

Last week I attended the Beijing auto show, which generated the usual hoopla of show cars, press conferences and CEO interviews. Yet it wasn't the new car models that impressed me most but the vast, economically underdeveloped areas I saw as I traveled to Beijing by train from Shanghai. And that , in turn, reminds me of the huge growth potential China's auto market still has after years of hectic expansion. I grew up in eastern China's Jiangsu province and have lived in Shanghai for more than 20 years. Jiangsu and Shanghai are two of the most developed areas in the country. An express railway between Shanghai and Beijing that began operating last year reduced the train ride between the cities to five hours, so I decided to take the train. When it left Shanghai and entered Jiangsu, I saw networks of highways, many factory buildings and densely populated cities. But when the train crossed the Yangtze River at Nanjing, in Jiangsu, it was like entering a different country. On both sides of the railway line were vast stretches of farmland that water buffaloes and mules are still used to plow. The view remained more or less the same for the four-hour passage through Shandong and Hebei provinces. But when we approached Beijing, the modern metropolis suddenly loomed. What a learning experience! The last time I took a train to north China was in the 1970s, when I was a kid. China was largely an agricultural economy at that time, so rural areas looked the same everywhere. The country has undergone tremendous economic growth since then. But its inland expanses lag far behind the coastal regions. Though per-capital gross domestic product exceeds $12,000 in Shanghai and Beijing, the typical worker earns only $4,000 in Anhui, $5,000 in Hebei and $7,500 in Shandong. In tier-one cities such as Beijing and Shanghai, car ownership has reached 70 vehicles per 1,000 residents. But in tier-two regions like Hebei and Shandong, the rate is only 29 per 1,000, according to LMC Automotive, a market research company. That means is that China's car market, already the world's largest, still has tremendous potential. With industrialization spreading inland, where labor is still cheap, the tier-two and -three regions have become the new growth engine for autos. When auto sales dropped in most tier-one regions last year, it remained strong in tier-two and -three areas. Judging by what I saw on the train last week, these regions will lead China's auto market growth for many years. --Yang Jian is managing editor of Automotive News China

China's Lower Tiers Offer Vast Potential for Auto Market

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