By Chris Isidore
DETROIT (CNNMoney) — More cars were sold in China last year than in any other country at any time in history. And industry officials only expect those sales to grow.
But the rush to build more cars in China to feed that growing market could soon become a big problem.
The more than 30% sales growth achieved in China in 2010 — to more than 18 million vehicles — is probably unsustainable, especially as government officials are moving to put the brakes on car purchases.
Beijing is limiting new vehicle registrations to deal with the congestion that can make what reportedly should be a 30-minute ride from the airport to downturn into a two-hour odyssey most days.
The sales taxes on small car purchases, which were cut to 5% two years ago as part of China’s stimulus efforts, rose back to 10% as of Jan. 1. That means some of the strong sales at the end of 2010 likely came at the expense of this year’s sales.
Experts expect sales growth in China to slow to 10-15% this year. But many automakers are making investments based on the assumption of continued strong sales gains.
Ford Motor (F, Fortune 500), is expanding its Chinese capacity by about 50%.
“We certainly have ambitious growth plans for the future,” said Joe Hinrichs, president of the Asia Pacific and African unit at Ford, about its efforts to catch-up with which is playing catch-up in China with global rivals such as General Motors (GM), Toyota (TM) and Volkswagen.
GM, the leading automaker in China with its joint ventures there capturing about 13% of sales, is trying to add to its lead with two new plants now under construction.
“In China, our plan is to stay about a half a plant ahead of demand. But over the last 24 months the market has grown so fast that we’re about a half a plant behind,” said Timothy Lee, GM’s Shanghai-based president of International Operations, during a visit to the Detroit auto show this week.