China Takes Pole for Car Sales...

China is clearly going to take the driver’s seat in global car purchases, at least per a story in the Economist online edition article titled “China Takes Pole” which shares the details that more vehicles are to be sold in China in 2011 than anywhere else in the world.   As sales are projected to remain soft in the rest of the world as many government sponsored programs like “cash-for-clunkers” now fade to black, and coupled with the Japanese’s triad of disasters (earthquake, tsunami, and nuclear meltdowns) further places China forward as the growth market to be in for years 2011 and into 2012.  However the belief is that even with China stepping up their purchasing some 10 million vehicles per year over its 2007 levels still won’t be enough to fill the gap as India the other big up and coming player is slated for only slight gains over the same period meaning doldrums for the next 24 months.

However this has additional implication outside of the car market itself as cars need fuel, and we all know that fuel comes from oil and there is only so much of it to go around.  Thus as things are zero sum and our life’s lay in the distributions between the two sides we have to understand there is always a cause and effect.  So in essence we can say that in line with Newton’s laws (for every action there is an equal and opposite reaction) that:

Cause = Effect and therefore    Effect = Cause

So the “effect” will be a greater demand for gasoline and therefore this will “cause” a drop in supply which will lead to an increase in costs as the ratio of supply and demand drive costs.  This in turn could impose further negative pressure as the distribution of disposable income shifts to increase fuel cost, this will leave less monies for capital purchases such as cars.  In turn this action will feed the cycle to again push further sales to China, which in turn will drive up fuel cost until a corresponding negative going balancing loop applies cost pressure on the fuel side in China.

This in turn will form a classical sigmoidal formation or in simpler terms an “S” curve where there is a short uprising lead with very fast rise that leads to slowing tail which is the resulting balancing loop in system terms.  In short this will also produce a cascading “cause” and “effect” in the arena of social affluancy as each car which isn’t sold, means one less lunch a restaurant sells, to fewer hamburgers purchased from the food wholesaler all the way down the line.

The combination of these causal trends will come together into counter loops with fuel cost at the crux of both viral engines as one is driven upward and the other downward as the internal distributions shift.  All of this summarizes to yet a further bleak outlook for North American and the United States in particular as its current course of a jobless recovery will continue for the foreseeable future as until there is stabilization in the disposable income which was pushed to fuel cost adjusts, there won’t be a positive reinforcement loop created to promote employment growth …

About Joseph Campbell

As a strong believer in the fact that "people work for people", it has been a life driver to better to understand the complexities of the various aspects which drive efficiency within this axiom, especially the concepts of leadership. Supporting this, I have been fortunate enough to having experienced this as leader on a global basis over the last decade and half. During this time it has been clear there are three core drivers being Life, Leadership and Economics.
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