The Boston Consulting Group---These are challenging times for executives in China's automotive market. In 2002 and 2003, China had experienced phenomenal growth in auto demand, following the country's entry into th world Trade Organization in December 2001. Form the end of 2001 to the end of 2003, passenger car sales grew at a compound annual rate of 64 percent. In 2003, China became the third-largest automotive market in the world, after the United States and Japan, with total commercial and passenger sales of 4.4 million vehicles.
However, this red-hot market cooled dramatically in 2004, when passenger car sales increased only 13 percent over 2003, to 2.24 million vehicles---sharply down from the 74 percent rise to 1.98 million vehicles in 2003. This deceleration continues in 2005. Moreover, slowing growth combined with falling prices, significant increases in capacity, and a proliferation of new-model launches has turned China into a fiercely competitive auto market---one that is rapidly separating the winners form the losers. What's going on? And what can participants do to position themselves for success?
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