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China Gears Up for Auto Industry Shakeup
CNBC.com | March 03, 2009 | 02:02 AM EST

The auto industry is set for a complete overhaul. General Motors recently announced plans to eliminate several lines including its Saturn brand. European carmakers are in the same boat.

Here in Asia, Japanese automakers are in much better shape. However, given the global downturn, companies such as Toyota, Honda and Nissan have enforced production holidays.

Over in China, the local auto sector looks set to undergo a consolidation phase as intense competition and a sales slump is likely to force out smaller manufacturers.

There are around 57 automakers in China. Subtract the subsidiaries from that list, and there are still looking about 40 domestic automakers. This might not seem a big deal if you take into account a population of over a billion people. But not every single Chinese person drives.

The latest global transportation statistics compiled by the United Nations, shows per capita vehicle ownership in China at just 10 autos per one thousand people. Compare that with 765 vehicles per thousand in the United States, 426 per thousand in the UK and 158 per thousand in Singapore.

Ten vehicles per thousand -- the numbers speak for itself. There are too many automakers in China. The small ones should really disappear, especially if they’re non-productive. It's way too expensive in terms of technology to compete against the big boys.

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