Chinese auto sales: Opportunity, Danger or Threat?

BYD Automotive is a favorite of Warren Buffett

In April China sold 1.15 million autos, up some 25 percent from last April. Unbelievably, more cars might be sold in China this year than will be sold in America.

Fortunately, for US automakers, brands like GM's Buick are top sellers in this barely emerging automotive market, so China represents a huge opportunity for US automakers. Unfortunately, China also represents not just danger for America, but the Chinese automotive market could end being an outright threat to the US economy and its national security.

For instance, last summer's run up in gas prices was helped by Chinese demand for oil, which is obviously only going to grow, significantly. As America comes out of this recession, US demand for oil will increase. Eventually this demand will again squeeze the margins and guarantee that higher gas prices will be coupled with our economic recovery.

Yet, higher gas prices might not even be the real threat.

Recently, Warren Buffett became a significant investor in Chinese automaker BYD. Actually, BYD isn't much of an automaker, it's a battery maker. That is quickly changing, however, as the company is now building its future on battery powered vehicles: hybrid cars and other plug-in vehicles. In fact, Buffett believes that in just a decade or two BYD could be even bigger than Toyota.

Certainly it is too early to predict how China will affect the world's automotive market. Will China be America's greatest automotive opportunity in decades, or a threat even far bigger than Japan ever presented? I guess we'll see, but Buffett's investments indicate that US automakers will soon be facing serious Chinese competition that will forever change the world's automotive landscape.