China’s auto industry getting the sniffels.

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

What a difference a month makes. A few weeks ago, the big automakers still looked at China as a threat. When auto sales tanked last month in the U.S., and fell in Europe, automakers looked to China to save their numbers. China won’t be able to make up for the losses in the West. According to statistics released by the China Association of Automobile Manufacturers, 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 in a country where double digit growth rates used to be the norm.

Sales of passenger vehicles in the January-September period rose a respectable 11.4% to 5.1 million units. However, the September decline in passenger-vehicle sales foretells a full-year sales growth in the single digits. 2007 saw a rise of 21.8%. The decline was ominous, because September is usually a strong sales month in China, as consumers flock to showrooms to buy cars ahead of the Golden Week holiday in October.

The notable stand-out was Volkswagen AG. They sold 772,783 vehicles in China from January to September, a 13% rise compared to the same period in the prior year. Demand for Volkswagen’s Audi luxury brand bolstered the parent company’s sales. Volkswagen wants to sell one million units in 2008, an increase of 9.8% from the 910,491 vehicles sold in 2007. According to the company, Volkswagen will sell more cars in China than in its home market Germany in 2008, China can’t save ‘em all. But they save Volkswagen.

The shift from red hot sales to a more sedate tempo doesn’t indicate a saturation of the Chinese auto market. When it comes to cars, China just started their engines. By the end of 2007, the total number of vehicles on China’s roads was 57 million units. However, the total includes 14.68 million three-wheeled vehicles and low-speed vans. Currently, China’s vehicle ownership per thousand populations is below 50. The number is 740 in the United States, and more than 500 in Europe. The world’s automakers produce 69 million cars per year. Even if the whole world would stop and make cars for China only, it would take more than ten years to saturate China’s market.