Honda Says China Will Soon Overtake US As Largest Market

China’s rapid, credit-fueled boom is losing its punch as new credit creation is becoming less efficient at driving growth – despite the Communist Party reporting a 6.9% growth rate for 2017 (which conveniently surpassed the party’s “targeted” growth rate of 6.5% even though Chinese economic data is widely believed to be fabricated). And even though the risk of its economy collapsing in a mountain of bad debt remains ever-present, because there’s no telling when it’s “Minsky moment” will arrive, many economists believe its GDP will surpass the US some time during the next ten years, making it the world’s largest economy.

One UK think tank projected last year that China would overtake the US by 2032. But Honda implied an even faster shift in its latest sales guidance, where Japanese automaker behemoth projected that China will surpass the US as its largest market during the next couple of years, according to Reuters.

Sales in Asia have been so strong that the company lifted its full year profit outlook by 4%, with China leading the boom.

Indeed, while US sales stagnated last year, contributing to a 3% contraction in global sales, sales in China jumped 15.5% to 1.44 million units. In fact, Asia was the only region where Honda saw year-on-year sales growth in 2017. 

Honda, Toyota Motor Corp (7203.T), Nissan Motor Co (7201.T) and other Japanese automakers currently count the United States as their biggest market. But Honda has experienced explosive growth in China during the past three years, luring consumers with new offerings in the sport-utility vehicle (SUV) segment including its CR-V and Vezel models.

Last year, its China sales jumped 15.5 percent to 1.44 million units, even as overall vehicle market growth slowed to just 3 percent year-on-year, the weakest in at least two decades.

In contrast, sales in the United States, for decades Honda’s largest country market, were largely stagnant at 1.64 million vehicles last year, and significant growth is unlikely given that overall vehicle sales in the country are widely expected to retreat after peaking in 2016.

In the third quarter, Asia including China was the only region where Honda saw year-on-year growth in vehicle sales, while sales at home, North America, Europe and other regions fell. Honda expects Asia to overtake North America as its biggest source of annual vehicle sales for the first time this year.