China's auto industry getting the sniffles.

After double digit growth rates, China is taking it easy. By Bertel Schmitt, CEO Sinamotive Group (HK) Limited.

When times were good, the big automakers looked at China as a threat. When auto sales plummeted in the U.S., and fell in Europe, automakers looked to China to save their bacon. China won't disappoint. But it can't save them all. Sales figures just released by the China Association of Automobile Manufacturers, say that passenger vehicle sales in China fell for a second month in a row in September. They dropped 1.4% from the same period in the prior year to 552,800 vehicles. There are worries about a demand slowdown.

Still a very healthy rise: 11.4%

Still, sales of passenger vehicles in the January-September period increased by a healthy 11.4% to 5.1 million units. 2007 saw a rise of 21.8%. The September decline in passenger-vehicle sales indicates a full-year sales growth in the single digits. The decline came as a surprise, because September is usually a strong sales month in China, when consumers buy cars ahead of the Golden Week holiday.

Volkswagen AG was the hero. After so-so sales in prior years, VW sold 772,783 vehicles in China from January to September. This amounts to a 13% rise compared to the same period in the prior year. Volkswagen's Audi luxury brand contributed most. Volkswagen China plans to sell a million cars in 2008, which would translate to an increase of 9.8% from the 910,491 vehicles in the yedar before. According to VW's Finance Director, Volkswagen plans, for the first time in history, to sell more cars in China than in its home market Germany in 2008.

No saturation in sight.

The shift into lower gears doesn't mean that a saturation of the Chinese auto market would be near. China just started when it comes to cars. In 2007, the total number of vehicles in China was 57 million units. That total also counts 14.68 million three-wheeled vehicles and low-speed vans. As it stands, China's vehicle ownership per thousand populations is below 50. The number is 740 in the United States, and more than 500 in Europe. It will take a long time for China to reach saturation. Total world output is 69 million cars per year. Even if the whole world would produce cars for China only, it would take more than ten years to bring China's market to saturation.