Moreover, China has overtaken Japan to be the second largest automotive consumer in the world in 2006.

Reduced tariffs are expected enable foreign companies to slash the prices of their cars and compete with the products of domestic OEMs. Meanwhile, new rules on the qualification evaluation of car dealership will ensure the elimination of car dealers without authentic authorisation, aiding fair competition in the market.

“Policies have also been drafted to improve the quality of car parts and components to guarantee the safety of passengers,” says Frost & Sullivan Industry Manager Cecilia Yuan. “The move to promote the consumption of low-cylinder volume cars will not only improve their effect on the environment, but also raise the prices of luxury cars.”

Further, the State Council’s mandate to rationalise the structure of the automotive industry will curb irrational expansion of production. All these factors expect to go a long way in accelerating the passenger car market’s development.

In 2006, China outstripped Japan as the second largest vehicle consumer in the world and it is likely to sustain this high growth in 2007. The sales of passenger cars and commercial vehicles expected to increase by 22% and 7.8%, respectively, to touch 6.30 million and 2.20 million. The Chinese automotive market anticipates rolling out 8.5 million units in 2007, 15% more than 2006.

“Sedans claimed the largest market share, followed by minibus, sport utility vehicle, and multi-purpose vehicle (MPV), with market penetration rates of 74%, 17.7%, 4.5%, and 3.6%, respectively,” notes Yuan. “The Chinese Spring Festival in January also ensured that the sales of passenger cars rebounded in March and peaked in December.”