Mitsubishi Motors Corp.'s chief of China operations believes China may face a slowdown in its domestic auto market after next year -- the year of the Beijing Olympics, when he expects annual demand for automobiles there to continue to grow fast and hit 10 million vehicles.
Shinsuke Katsuragi, head of Mitsubishi's North Asia office, doesn't believe China's burgeoning auto market is going to contract. "But once the market's annual volume hits the 10 million-vehicle mark, the growth is going to slow down and we are going to hit a plateau," he said in a recent interview in Tokyo.
"It's unlikely the market is going to keep growing 20% year-on-year every year, as it has in the recent past."
Mr. Katsuragi said automobile sales in China are likely to total about 8.5 million vehicles this year. He believes the volume then will likely climb to 10 million vehicles in 2008 before slowing down considerably in 2009.
Mitsubishi is a laggard in China. While Volkswagen AG, No. 1 auto maker in China, is expected to sell nearly 800,000 vehicles this year, the Japanese auto maker will likely sell about 100,000 vehicles.
Mr. Katsuragi says his "near-term" objective in China is to sell 130,000 vehicles or more a year, with imports from Japan accounting for 20,000 of the total. The rest is expected to be generated by the joint venture companies Mitsubishi runs with Hunan Changfeng Motor Co. and Southeast (Fujian) Motor Co.
The company's biggest money maker, meanwhile, is its engine business. With two Chinese joint venture partners, Mitsubishi produces about 400,000 automotive engines a year. The company sells most of those engines, about 300,000 of them, to independent Chinese automakers, among which are Chery Automobile Co., Great Wall Motor Co. and BYD Auto Co.
Mr. Katsuragi declined to provide a forecast for the engine business but admitted there is a risk, as those Chinese auto makers grow their businesses steadily and look to produce engines on their own.
"Our insurance is that automotive engines are not that easy to produce, especially if you try to produce a massive amount and try to maintain consistent quality while doing so," he says. "We think it will be a while before they altogether stop buying engines from us."