Three Guys Discuss The Chinese Car Bubble Theory

The Truth About Cars reports:

I spent an interesting Saturday with two old friends of mine. They had never met before. One, American, CFO of an insurance company, had been in the finance and banking business all his professional life. The other, born Chinese, naturalized American. Was one of the top mortgage writers in the Silicon Valley before the dotcom crash. Came back to China and heads a Chinese/American bank. The two got along splendidly.

Of course, we talked about money and cars. Recently, there was a discussion on TTAC on how the bursting of the Chinese real estate bubble would destroy the car market just like it had in the USA. I eagerly set out to pick their brains.

Quite oddly, the first one to throw water on the bubble theory was my friend, the staid CFO of the staid insurance company. He thoroughly debunked the myth that the American car bubble of 2000 was created by people who had come into money by flipping homes instead of burgers...

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dlin - 4/11/2010 7:33:26 PM

+2 Boost

Mmm.... And?

Agent00R - 4/11/2010 9:51:33 PM

+1 Boost

I guess you don't follow economics...

dlin - 4/12/2010 12:12:35 AM

+4 Boost

I do, but I don't see any car bubble for China if there're still people riding bike.

Real estate? Now we're talking.

nguyenvuminh - 4/11/2010 10:08:56 PM

+1 Boost

How would you describe the following scenario?
People that can afford a car priced at $30K was determined to qualify for a car loan to buy a car worth $50K. Banks and finance companies are competing for such buyers and the car mfrs seeing this, increased their production of $50K cars. An economic crisis comes around resulting in loss of jobs/income and those car buyers can't afford continuing loan payments (in addition to other loan payments such as mortgage). They default on their car payments and with the repo, there's a bunch of cars in the market.

truckman - 4/11/2010 10:13:54 PM

+4 Boost

Car bubble? If I were China I would not have a bank with America, I love Americans but the Federal reserve is so corrupt and with the Americans help the China economy will crash.

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WorldofLuxury - 4/11/2010 10:41:23 PM

+3 Boost

I see... there's a bubble, eh? At the moment, all I can say is, "So what? Now is now, and now has a lot of money-making potentials."