Although it is widely believed that the global auto industry is one of the industries most severely hit by the current economic downturn, iSuppli's research shows that the Chinese auto electronics market may maintain a moderate growth even under such a severe situation. Where's the growth driver?

The main driving force for the growth of the Chinese automotive electronics market will come from the powertrain sector, which will benefit from the Chinese government’s economic stimulus plan. iSuppli Corporation predicts that the revenue generated by the Chinese powertrain market in 2009 will reach US$2.8 billion, an increase of 19.2% over 2008.

The engine management system (EMS) is the most important powertrain application. The growth momentum is expected to be stronger. In 2009, the shipment volume is expected to reach 10.2 million sets, which is an increase of 15.3% over 2008. Driven by the growth of the powertrain market, it is expected that the semiconductors consumed by the Chinese automotive powertrain market in 2009 will reach US$479.5 million, an increase of 17.7% over 2008. It is expected that sales will reach US$1.04 billion in 2013 and the compound annual growth rate for 2008-2013 will reach 22.1%.

　 Short-term stimulus

According to China's national auto industry stimulus plan, from January 20 to December 31, 2009, auto purchase tax of 1.6 liters and below will be lowered to 5%. The stimulus plan will also arrange for a subsidy of 730 million U.S. dollars (about 5 billion yuan) to encourage farmers to abandon tricycles and slower trucks, replacing them with light trucks and small vans with a displacement of less than 1.3 liters. Only from March 1 to December 31, 2009 can these subsidies be enjoyed.

These preferential policies have created an immediate stimulating effect on the market. In the first two months of 2009, sales of small passenger cars surged, which was 18.8% higher than the same period in 2008. In 2008, the total sales volume of such vehicles was 3.1 million, accounting for 61.5% of the total passenger vehicle sales. Due to the tight supply, the price of some cars has even increased.

Newly-purchased tricycles and low-speed trucks in rural areas did not count toward total vehicle sales. In 2007, sales of such vehicles exceeded 2.1 million. The Chinese government’s 2009 purchase subsidies not only cover the newly-increased tricycles and low-speed trucks, but also cover the existing 7 million vehicles, totaling more than 9 million vehicles. The 5% replacement rate will bring 450,000 new consumption, which represents an increase of 4.8% over 2008.