It unlocked some of the biggest fortunes of the 20th century. And it's the ultimate symbol of middle-class freedom and mobility.
I'm talking about private car ownership. It has been a pillar of the American dream since Henry Ford began mass-producing the Model T over a hundred years ago.
But if you think the U.S. automobile market is the biggest in the world... think again.
China is the world's largest auto market by a country mile, selling 23.7 million cars last year.
That's almost what the U.S., Japan, and Brazil sold combined.
Today, I'm writing to you about China's incredible car market because – as hard as it is to imagine – it's about to get even bigger.
More importantly, this shift could lead to a slew of new investing opportunities you probably didn't know existed.
Let me explain...
China's car market was virtually nonexistent just three decades ago. But by 2010, it completely overtook the U.S.
And today, China sells 10 million more cars per year than it did back then. Take a look...
But growth of this magnitude eventually slows down... And that's been happening in China lately.
Since posting its first annual decline in history last year, Chinese car sales have fallen by double digits so far this year.
There's no shortage of news about it, either...
"Chinese auto sales post worst-ever monthly decline as trade war intensifies," Reuters wrote when May sales came out last month. The results showed a 16.4% year-over-year decline.
Another headline from the Financial Times read, "Car sales plunge in China ahead of emissions rules." That story reported on stricter emissions standards coming to several Chinese cities this month.
It's all very scary stuff – enough to keep most investors away.
But here's what the media won't tell you about this huge market...
With a car population of 240 million, China has almost as many cars on the road as the U.S. does (about 272 million).
The difference is that it took the U.S. nearly half a century to amass that many registered cars. China, on the other hand, added 185 million cars in the last decade.
That means eight out of every 10 cars in China today are less than a decade old.
The massive demand for new cars in the country is powered by fresh demand rather than replacement demand.
In fact, secondhand car sales in China amounted to just 13.8 million last year. So about half of new car buyers are not replacing their older cars. And that's a huge potential market China hasn't tapped into yet.
By contrast, estimates say secondhand car sales in the U.S. amounted to a whopping 40 million last year... more than twice the new cars it sells each year.
China simply doesn't have enough good-quality old cars on the road to support a large secondhand market like the U.S. – yet.
But it will get there. Despite its huge sales numbers, keep in mind that China's car penetration rate is only one-fifth that of the U.S.
So there's still a lot of room for growth.
As China's secondhand car market catches up to the U.S., tens of millions of Chinese will be able to dispose of their older cars... freeing up money (and parking space!) to buy new ones.
China is the world's largest car market. And contrary to what you hear in the news, it's just starting to hit its stride.
Good investing,
Brian Tycangco
Further Reading
"China's stock market needs to soar to catch up with its economy," Brian writes. That's exactly what we expect to happen... with staggering profit potential for investors. Get the details here: The Biggest Catch-Up Story of the Decade.
"You want to find what others have no interest in owning and put your money to work," Chris Igou says. Most investors are terrified of investing in China today... And that's one reason this opportunity is so huge. Learn more here.
What's big in the U.S. is bigger in China. That's true when it comes to China's car market – and it's true for other industries, too...
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
American Express (AXP)... credit-card giant
MasterCard (MA)... credit-card giant
Visa (V)... credit-card giant
Ally Financial (ALLY)... financial services
Worldpay (WP)... cashless revolution
PayPal (PYPL)... cashless revolution
Global Payments (GPN)... cashless revolution
Adobe (ADBE)... cloud services
ServiceNow (NOW)... cloud services
Comcast (CMCSA)... telecom
Invitation Homes (INVH)... rental homes
AvalonBay Communities (AVB)... rental apartments
Essex Property Trust (ESS)... rental apartments
Public Storage (PSA)... self-storage
Walmart (WMT)... world's largest retailer
Dollar General (DG)... fast-growing retailer
Costco Wholesale (COST)... membership-only retail
Royal Gold (RGLD)... gold royalties
Franco-Nevada (FNV)... gold royalties
Newmont Goldcorp (NEM)... world's largest gold miner
Genesee & Wyoming (GWR)... railroads
ResMed (RMD)... medical devices
NEW LOWS OF NOTE LAST WEEK
Chemours (CC)... chemicals
Nordstrom (JWN)... clothing retailer
Big Lots (BIG)... discount retailer
Bed Bath & Beyond (BBBY)... home goods
Bloomin' Brands (BLMN)... Outback Steakhouse
