Report sees bend in road for China’s car sector

While high-end car sales will remain an important driver of China's car market, after-sales services are expected to lead the sector's growth over the next decade, a study by global consulting firm McKinsey said yesterday.

China, the world's largest car market, will see local car-sales growth slow to about 6 per cent annually between now and 2020, compared to an average of 18 per cent in the period since 2006, according to the study.

However, high-end vehicles will outperform the overall market with growth of 8 to 10 per cent a year, the report said, boosted by consumers' desire to upgrade their vehicles.

After-sales services, which includes car financing, spare parts and used-car sales, is an even more promising sector, with expected revenue growth as high as 20 per cent a year by 2020.

"China has lagged far behind the United States and Europe in terms of the after-sales market," said Paul Gao Xu, a senior partner with McKinsey.

For example, he said around 90 per cent of US car buyers applied for car loans, but most Chinese consumers paid cash for their vehicles.

Gao said that was because the cost of applying for a car loan on the mainland was still high and procedures were complicated. In addition, consumers there were not in the habit of borrowing money for purchases, and lenders had not attached enough importance to the market.