Chinese car market: cool off or room to drive?

Many energy sector analysts worry that China is increasingly using raw materials and resources. These same analysts are concerned that we will hit peak oil decades earlier because of China’s incredible growth, after all of its people are now buying cars, its airlines are expanding, and its military needs fuel too. Therefore, the demand in the world oil market is far outpacing the growth in supply or the discovery and exploration of proven resources.

Of course, the Chinese drive smaller cars, they are not like the big V-6 or V8 engines that we have here in America. Not long ago, I was discussing this with an acquaintance and I pointed out that Chinese are more efficient than Americans, because they are smaller people and they don’t weigh as much. Unfortunately, the United States is not only exporting technological innovations to China, we are also exporting diabetes and our unhealthy diet.

Of course, China also has to be careful not to sell more cars than can fit on the roads, otherwise there will be perpetual traffic jams and all those little cars won’t be able to move, and it’s almost so if they can’t build the roads they will. Fast enough, or the airports, or the train stations. My acquaintance pointed out that riding a bike is probably the best mode of transportation, unfortunately China, like America, is a huge country and it’s not like you can ride a bike everywhere.

Meanwhile, many Chinese have scooters, some of them are electric. It would be nice if in the United States more people were driving scooters and electric bicycles and things of this nature, but we must also understand that in the United States the majority of our population lives in a big city where it is somewhat unsafe to drive scooters and bicycles, and the The rest of the population lives in rural and suburban areas, many of which are widely dispersed. Those types of vehicles are great for getting around town, but they don’t work very well when you’re out in the country.

The Chinese have enjoyed the growth of vehicle sales in their country, and after the global economic crisis they did offer tax incentives and eliminate road taxes for a time. Now there are too many cars in China, so now they are re-applying road taxes for anyone who buys a vehicle. And let’s not forget that there is a huge difference between the three-cylinder vehicles and the large eight-cylinder vehicles and SUVs that we drive here in the United States.

However, my acquaintance’s point is well taken; China sells as many or more cars than the United States each year, and those numbers are likely to increase, so even if each car uses much less fuel, all of those cars add up and drive up demand for more oil. Regarding road taxes in China; now they have raised them twice and reinstated other taxes since the stimulus, and they plan to raise them again. If you are a member of the Chinese middle class (460 million people making more than $ 1200 per year) it is significant, and you realize that most Chinese save and buy their cars for cash.

Now keep in mind that China is not the only nation that sells a lot of cars and uses more oil. Almost all fast-growing emerging nations are doing the same, and India is close behind. In Vietnam they have sold so many cars that they do not have enough roads to drive all the vehicles and now there are constant traffic jams with scooters and motorized bicycles between all the cars stuck in traffic.

Some say that the Chinese car market is crumbling, but that is only temporary due to inflation, increased road taxes, and the number of roads available to drive in and around large cities. That will be your biggest problem going forward, but rest assured that China will also use more oil, which will also increase the cost of owning, maintaining and operating a vehicle. Consider all of this and think about it. If you have any comments, questions, or concerns, please email me ASAP.