Ambitious Chinese car makers have stepped up their capacities, threatening to flood the market with an oversupply.
Heavy traffic is on the way from China
Nathan Yang, an export manager for the Chinese car maker Hawtai, is looking forward to the day when his company's vehicles are a common sight on Sheikh Zayed Road.
Recently in the Emirates to help spearhead plans to sell Hawtai saloons, he thinks Dubai could form the hub of the company's regional operations.
"It's an important market for the whole Middle East area," he said. "When our vehicle is ready, we're planning to establish a dealer in Dubai."
While Hawtai may be looking overseas, the home market remains overwhelmingly the company's priority, just as it is for other Chinese car makers. After all, last year the dragon economy overtook the US to become number one for car sales, with 13.6 million cars and vans driven off the dealers' forecourts.
"The Chinese market is the first and most important for our company. It's the biggest market in the world," said Mr Yang.
When it comes to China's car industry, no superlative seems to be enough right now. This year, sales of cars and vans have hit new highs, rocketing 34.8 per cent in the first 10 months of this year compared with the same period last year, reaching 14.7 million.
Individual tales of hyper-success are not difficult to find. For example, the Germany luxury car maker Mercedes-Benz achieved its China sales target for the whole of this year by the end of September. Even General Motors now sells more cars in China than in the US.
However, amid China's seemingly relentless climb into the automotive stratosphere, a few cautionary notes are starting to be sounded.
Government financial incentive schemes for car buyers, due to expire at the end of this year, are one potential spanner in the works.
A concern related to this is that manufacturers are getting ahead of themselves and, such is their desire to capitalise on sales growth driven by increasing wealth and growing urbanisation, are investing so heavily in new manufacturing plants that the industry will soon be suffering acute oversupply.
Profitability in car manufacturing depends upon keeping production lines rolling to the extent that break-even requires 80 per cent utilisation, say the analysts JD Power and Associates in a study reported by state media this year.
According to the researchers, last year China's car industry used just 70 per cent of its capacity, and with new plants coming on stream, even this year's record sales are not expected to prevent a decline to 67 per cent utilisation, with further reductions expected in subsequent years. Timothy Dunne, JD Power's director of Asia Pacific market intelligence, warned that desperation to secure sales could result in "deflationary price wars, which will weaken all competitors".
At a recent car summit organised and reported by Reuters, Raymond Tsang from the analysts Bain & Company warned the industry was "going to look at a pretty massive overcapacity in the medium term".
"Some capacity will have to be shut down because the global market is not growing," he said. "There is no way that the industry could for a long time sustain this low utilisation."
While he predicted China's car exports would grow - after a fall of nearly half last year to a derisory year-end figure of 369,600 vehicles, healthy increases have been posted this year - even this will not be enough to keep the sparkling new car plants busy.
Car makers, said Mr Tsang, are still expecting annual sales growth of 30 to 40 per cent, but instead increases are likely to stabilise at 13 to 15 per cent as government stimulus measures are wound down. He said that if plant-building continued, in a few years total capacity could reach an astonishing 40 million vehicles, way beyond even the most optimistic sales forecasts.
Others have warned China's large number of car brands - there are said to be more badges on offer there than in any other market - also poses challenges to the industry.
Geely, the car maker that made headlines last year with its takeover of Sweden's Volvo, possibly offers an example of a manufacturer that risks spreading itself too thin.
As well as its own Geely brand, the company has come up with the Englon name, an upmarket and stylish brand called Emgrand and the Gleagle name, under which a tiny car called Panda actually designed to look like China's favourite bear is produced.
However, despite the possible warnings of over-ambition within the industry and with sales still rising, John Zeng, JD Power's director of Asia vehicle forecasting, believes overcapacity is "not an immediate threat".
"In recent years, the main issue is a shortage of capacity, not overcapacity," he said. "We do see many [manufacturers] launching plants to expand their capacity for now.
"From the announcement [of a new plant] to the capacity [becoming active] it takes at least two years and if they announce 200,000 units, they will do it phase by phase. For example, 60,000 first, then 100,000 and 150,000 before they ramp up to 200,000.
"The investment is related to the market situation. I am not that worried about the overcapacity situation."
Experience shows that China's car makers can cope if sales growth is not quite what is expected, said Mr Zeng. He cited one Chinese-foreign joint venture that once announced a 600,000-unit increase in car-making capacity, only to find ultimately this was not needed. No problem; the Chinese partner in the joint venture simply took up the slack to produce vehicles under its own brand.
"Maybe they plan too much, but when they reach that point and find the market has slowed, they can adjust their investment plan," he said.
Mr Zeng also suggested announcements about sales and factories should sometimes be taken with a pinch of salt.
"If you're talking about five years from now, nobody knows what the real capacity at that moment will be," he said. "Every company talks big. If you're not talking big, maybe the consumers or dealers will lose confidence in you."