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Chinese still buying cars - fuel efficient ones

GUANGZHOU, Guangdong Province – Seeing the jostling crowds at the Guangzhou auto show, it seems hard to believe that car sales have slowed in China.

Over two sprawling levels of a convention center here, flashy sports cars, minivans, SUVs, Jeeps, the odd concept vehicle, even RVs, beckoned people to imagine a shinier mobile lifestyle.

"We already have a small car, so we want a bigger car like a four-wheel drive," said Tang Qing, a young well-dressed woman whose "small car" is a BMW.  "So the whole family can go out together." 

"The GLK is the model I like," she added, having just checked out that model of SUV at the Mercedes-Benz display.

Image: China auto show
Adrienne Mong/NBC News
The 2008 Guangzhou auto show draws huge crowds. 

Tang exemplifies the young Chinese consumer over whom market researchers smack their lips.  China, according to one such survey, has more aspirational car buyers than any other nation in the world.  

And this desire for the trappings of a better life – combined with the growing means to realize material ambitions for the world's largest population – has helped make China the biggest auto market after the United States.

For the past six years, the country has clocked more than 20 percent growth in domestic vehicle sales. Last year, 8.8 million vehicles were sold here. 

But this year sales have slowed considerably – owing to growing economic uncertainty abroad and at home. Analysts are forecasting growth of around 8 percent for this year. And Chinese carmakers are apparently apprehensive enough to have considered seeking a government bailout of their own. 

Against this backdrop, Tang appeared to be the rare luxury buyer the morning the NBC News team wandered through the auto show.

Economic concerns weigh on car consumers

 
On Friday, China Daily quoted officials as saying that, in some cities, the unemployed outnumber job vacancies by a factor of 2 to 1. Reports like that continue to fuel consumer hesitation over purchasing big-ticket items. 

A young woman who would only give her name as Hicky said she was concerned about widespread layoffs around her. "For now, I won't buy a car probably," said Hicky, who favored Chinese domestic brands like Great Wall Motor.

Image: China Auto Show
Adrienne Mong/NBC News
Even in a downturn, luxury brands in China attract a lot of browsers. 

After doing his initial research online, first-time buyer Li Xiang Xing from Guangzhou decided to come to the auto show to see in person what he could afford.

"If it wasn't for the [economic] crisis, we would buy more expensive cars," he said, looking at the Ford models on display around him. "Now we have to be frugal."

Guangdong province – of which Guangzhou is the capital – is the nation's biggest vehicle market. More than 95 million people live here – many of whose pockets have rapidly grown deeper over the past thirty years.

But it is also the country's industrial exports nerve center. Residents in Guangdong have been hit hard by the rapid decline in orders for, well, anything from overseas and a general downturn in China's economy that began with high inflation last winter.

VIDEO: Will American cars still sell in China?

Fuel efficiency is top priority

 
Like anywhere else, sales of automobiles in China are affected by the cost of gasoline. Oil prices may have dipped below $50 a barrel in the global market, but here they remain under state control as part of efforts to control inflation – and they remain quite high. Gasoline at the pump costs at least fifty percent more than what it does on average in the U.S.

The central government announced that it will cut gas and diesel prices on Friday – some financial analysts estimate they could go down by as much as 15 percent. But the catch is that a long-awaited fuel tax will also be instated, thereby lessening the impact of lowered gas prices. 

The high cost of gasoline means many Chinese won't consider buying American, even while they admire the quality of, say, a Ford or a Buick. 

Image: China Auto show
Adrienne Mong/NBC News
American brands in China are admired for their style, but not their mileage. 

"I look at American brands," said Zheng Hui, a young man with spiky hair. "I saw a Ford model. It's not bad. It's very beautiful. When we can afford it, we will think about it. But not now."

"American cars burn more gas," said Jiao Wei Chiang. "I mainly check out cars made in China."

No doubt Jiao's attitude will help China's vehicle manufacturing standing. Chinese officials have estimated that the country could overtake the U.S. as the world's biggest car producer by 2020, with a total output of 15 million vehicles a year projected by then.

The focus on automobile manufacturing is part of the central government's efforts to steer the country from low-end to high-end production – especially as the global financial crisis takes a greater toll on China's exports-reliant economy.

A middle-aged man who didn't want to be identified because he works in the automotive industry said he preferred Japanese brands like Mitsubishi. "Although American cars are very safe, they burn a lot of gasoline so they're not as good as Japanese cars," he said. "But for families with middle or higher incomes, it's no problem to choose a car made in America."

But even those more prosperous, like Tang – the chic young woman with her eye on the Mercedes SUV – gas prices are an issue. "Gas consumption is the biggest factor for me to decide what to buy," she said.

Sounds like the Big Three U.S. automakers might rethink their expectations if they were hoping that the Chinese market would save them from their financial woes.