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While China had its best ever year of auto sales in 2011, there may be some storm clouds on the horizon.According to The Detroit News, Chinese auto sales only grew 2.5% in 2011, which is the smallest rate since 1999.
In 2010, sales rose a full 32% over 2009, so this makes 2011 a much less successful year than it initially appeared on paper when China became the number one car market in the world.
The decline can be directly related to the end of tax incentives that were implemented to encourage growth during the global financial crisis. Additionally, Beijing added restrictions to car purchases that worked to slow sales there as well.
While analysts are predicting increased sales in 2012, they do not believe that it will be back to the outrageous levels that were seen during the early and mid 2000s.
Heavy investments from European and Japanese brands have also spelled trouble for Chinese domestics. The established brands are showing the way in quality while also competing directly on price, which is an area where they previously didn’t stand a chance.
High market demand will continue for years, but the trouble could lie in infrastructure. If the Chinese roads and power sources cannot keep up with demand for cars, the industry could enter a precarious position.
Small growth was enough to make China the number one global auto market in 2011, but if marketshare continues to decline, it may not stay at the top for long.