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China Passenger Car Market Expected to Continue Upward Momentum; Areas of Growth, Opportunity are Changing

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A new analysis of the automotive market in China suggests significant growth opportunity continues in many of the country’s provinces; however, some provinces will start to see growth rates change significantly, according to a new detailed province-level forecast now available from IHS Automotive, part of IHS Inc. (NYSE:IHS) , a leading source of critical information and insight to the global automotive industry.

The forecast, the first of its kind in the industry, includes passenger vehicle demand for 31 provinces in China and incorporates the input assumptions from no less than nine market-leading forecast services — in conjunction with broad economic and demographic intelligence from IHS — to provide a robust solution for vehicle manufacturers, suppliers, dealers, and marketers seeking to understand the business opportunity in China and strategically plan for growth. The forecast also includes vehicle demand, segment trends, model/body style demand and brand coverage from foreign import brands, joint venture brands and Chinese domestic brands.

“If we think of China as 31 separate countries, 19 of the 20 fastest growing passenger vehicle markets in the world since 2002 are in China,” according to Henner Lehne, global head of light vehicle forecasting for IHS Automotive. “Our new forecast seeks to provide insight and guidance, inform key business decisions and investment, and offers a level of forward-looking intelligence on the market in China that has been unavailable up to now.”

According to IHS Automotive forecasts, passenger vehicle volumes in the country as a whole are expected to rise more than 10 million units by 2026.

Beijing, Shanghai Expected to Slow; Other Provinces Grow Exponentially

Results of the analysis show that the widely held view of China – namely that Eastern Coastal areas, approaching saturation, will be offset by growth to the West — is overly simplistic with more complex local dynamics likely to play out.

For example, while Beijing and Shanghai have been thought to have seen new passenger registrations peak (based on government regulations and license plate restrictions), IHS Automotive analysis shows some remaining medium-term sales growth prospects still remain there.

The complexity of market drivers in the Chinese market right now can be seen in recent data out of Guangdong province, one of the largest and more mature provinces, which is seeing car sales growth rivaling the strongest car markets in the world and growing at more than twice the China national average — and faster than the majority of Central and Western provinces.

The real market opportunities for automakers come from other parts of China as many provinces will experience a substantial shift in affordability, personal mobility needs, and vehicle development and production capacity improvements between now and 2026.

As an example, Shangdong, in eastern China, is currently the ninth largest market for passenger vehicles globally, now larger than Italy or South Korea, with additional growth expected. Also in the east, Fujian province was the 66th largest passenger vehicle market globally in 2002, but ranks 36th today, larger than Norway, Peru and Israel combined. And Qinghai province, which ranked as the 116th largest market in 2002, is ranked 80th today, larger than the automotive markets in Romania or Vietnam.

IHS Automotive also has identified some provinces that will achieve a significant slowdown in sales by the middle of the next decade. Shangdong, for example, was averaging double digit growth in passenger sales for many years; however this rate is expected to fall dramatically and average below 5 percent growth by 2026.

“A solid understanding of province-level growth dynamics is key for future success in China,” said Lin Huaibin, manager of China light vehicle sales forecast, based in the Shanghai office of IHS Automotive. “The new China provincial forecast provides insight through 2026 and addresses how population dynamics, rapid urbanization and the differential residential density of many large cities will affect vehicle ownership in the future.”

The forecast also outlines risks for early market saturation for some provinces but highlights great opportunities for other provinces for many years to come. Beijing Province, as an example, has had tremendous increases in vehicle sales in recent years. However, due to congestion, government policies and market maturity, vehicle sales will likely begin to fall within a few years at a modest, consistent pace from the levels they are at today. While on the other hand, Qinghai, a relatively small vehicle market today, will nearly double in size over the forecast horizon, and will likely continue to grow into the 2030s.

IHS Automotive anticipates updates to the forecast will be available every six months moving forward. The subscription includes a substantial analysis of the forecast overall and for each of 31 provinces, including historical and future forecast through 2026, several forecast drivers and macroeconomic indicators, as well as brand and model-level detail.

About IHS Automotive (www.ihs.com/automotive)

IHS Automotive, part of IHS Inc. (NYSE:IHS) , offers clients the most comprehensive content and deepest expertise and insight on the automotive industry available anywhere in the world today. With last year’s addition of Polk, IHS Automotive now provides expertise and predictive insight across the entire automotive value chain from product inception-across design and production-to the sales and marketing efforts used to maximize potential in the marketplace. No other source provides a more complete picture of the global automotive industry. IHS is the leading source of information, insight and analytics in critical areas that shape today’s business landscape. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs more than 8,000 people in 31 countries around the world.

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