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Chinese Auto Market: Steep Grade Ahead |
HenryTo
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 Posted: Wed Jun 01, 2005 2:43 pm Post subject: Chinese Auto Market: Steep Grade Ahead |
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Latest article from Forbes regarding today's dynamics of the Chinese domestic auto industry:
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Steep Grade Ahead
Robyn Meredith, 06.01.05, 12:18 PM ET
6/1/05 4:04:00 PM ET
A big Chinese company displayed its wares: Cadillacs parked next to Volkswagens, a SsangYong alongside a Buick and a Chevrolet--all made by SAIC, or Shanghai Automotive Industry Corporation.
It was the same story at its Chinese competitor in the next booth at the recent Shanghai Auto Show: a Toyota (nyse: TM - news - people ), Audi, Mazda--all made by China's First Auto Works with its foreign joint venture partners.
A worker at the show, struggling with English, tried to explain, "They are our cooperators."
Indeed. Not quite competitors, not quite partners, as the world's automakers rush into the Chinese market.
Just a few years ago, Chinese auto companies didn't know how to make a modern car. Now, thanks to the shared know-how of the world's best-known automakers, China's auto industry has moved into a new phase. The car market--like maturing Chinese markets for other goods--has come to this: lower profit margins for everyone and exports within sight for Chinese car companies.
For Chinese and foreign automakers alike, margins are thinning because China's growing middle class is snapping up lower-profit small cars, and because nearly every big foreign automaker has scrambled to sell in the world's fastest-growing new automobile market. "The China market is one of the few remaining markets," says J.M. Noh, president of Beijing Hyundai Motor, and that market is one of his company's top priorities.
No company wants to risk being left out, but the result is that car factories in China can now make more cars than they can sell in China. "It is going to be rough for everybody," says Michael Dunne, president of Automotive Resources Asia. Just as sales in China have slowed, auto factory capacity reached 3.5 million cars last year while sales hit just 2.5 million, leading most automakers to slash prices.
Some will feel the pain more than others.
China, land of bicycles, has for a few years been the unexpected savior of some of the world's largest most-troubled automakers. As the Chinese market soared in recent years, it overtook Germany as the world's second-largest auto market, boosting the financial results of early entrants such as General Motors (nyse: GM - news - people ) and Volkswagen.
Now, just when GM and VW find their global operations struggling the most, their China-market profit train has all but disappeared.
GM still earns more money selling cars in Communist China than it does in the U.S.--a market more than three times larger. GM had a 5% market share in 2000 and hit 10% last year in China. German giant VW saw its market share in China sink from a near-monopoly of over 80% in the 1990s to 27% last year as GM and most other automakers piled in.
But in April, just as GM reported dismal first-quarter earnings, it became clear that the newfound China market would no longer bail out the company. GM reported its China earnings were $33 million, down from $162 million the same time last year.
Still. GM executives and independent analysts predict the China auto market will grow 10% this year after a government-induced slowdown last year. "I see lots of growth potential in China," GM Vice Chairman Bob Lutz said in Shanghai.
Margins are slimmer because of a change in what's selling. When China opened its auto market in the 1990s, most foreign automakers sold only luxury vehicles and enjoyed profit margins of at least $3,000 to $5,000 per car--above their margins at home, says ARA's Dunne. The buyers were newly minted Chinese tycoons, government officials and foreign business executives trying to crack the China market.
Soon it wasn't just the rich. As the Chinese economy took off, the middle class started growing and spending money on cars. Automakers began offering midsized and small cars--sedans such as the Buick Excelle, Hyundai Elantra and Chevrolet Sail have lower margins than the luxury models but sell in greater numbers. Now the fastest-growing segment is minicars such as the Chevy Spark or Chery QQ, priced between $3,500 and $6,800.
GM counts 150 million Chinese with incomes of at least $3,000 a year--a car-affordability threshold. Sales are zooming, but minicars carry "margins that are closer to wood shavings than anything you can put in your pocket," Dunne says.
Leading Chinese car companies such as Shanghai Automotive Industry are dreaming of exports. Entrepreneur Malcolm Bricklin, who brought America the Yugo, plans to sell Chinese-made Chery cars and SUVs in the U.S. in 2007. |
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Chinese Auto Market: Steep Grade Ahead Replies |
rffrydr
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| Posted: Thu Apr 05, 2012 8:06 am Post subject: |
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Well Mercedes may be giving away handbags but GM powers on:
| Quote: | | "When the economy slows, people tend to delay replacing their cars," LMC Automotive's Zeng said. "But 82 percent of the car buyers in China are first-time buyers, and are still eager to buy." |
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rffrydr
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| Posted: Tue Mar 27, 2012 9:04 am Post subject: |
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Sales of homegrown cars fell one-sixth in the first two months of this year, more than two and a half times faster than China’s overall decline in car sales.
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rffrydr
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| Posted: Mon Feb 06, 2012 8:46 am Post subject: |
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Still no sign of a brand:
| Quote: | | SAIC Motor: own brands flagging: SAIC Motor said that net income for 2011 will have jumped more than 40% to almost Rmb20 billion. Unit sales picked up by almost a sixth last year, against a 5% rise in the wider Chinese market. Not bad in a country where car sales were 14 million in 2011. Its stock price fell 3%, admittedly after a 9% gain in January. One big problem may be that investors are nervous about SAICs inability to transfer successful tie-ups with Volkswagen and General Motors to its own brands. Sales within these co-branded car segments, which make up about two-thirds of total unit sales, accelerated almost a fifth last year. Sales of its own vehicles, such as the Roewe, however, were flat. Although sales are forecast to pick up by about a 10th this year, according to Citic Securities estimates, this is sharply down from growth of nearly half in 2009 and a third again in 2010. Growth is set to be strongest in less-congested smaller cities inland, but Chinese brands are unlikely to be the biggest beneficiaries. Sales of other homegrown brands have also been flagging. Sales of BYD, the marque in which Warren Buffetts Berkshire Hathaway took a high-profile stake, fell by almost a sixth last year; sales of unlisted Chery fell by 6%. |
This thread began with hand-wringing over less than 3million autos sold. We've come a long way in seven years.
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rffrydr
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rffrydr
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| Posted: Wed Aug 10, 2011 8:09 pm Post subject: |
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Autos up 2.2% in July, losses anticipated, in market 10X size of india's.
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rffrydr
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rffrydr
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| Posted: Mon Aug 02, 2010 8:07 am Post subject: |
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By now we've all heard that China has "surpassed" US auto consumption. Yes...but not really. Comparisons are to "great recession" troughs in NA and the bulk of the numbers are the subsidized glorified rickshaws sold into farm country. The mighty rototiller is finally being replaced and productivity boosted--but profits here there aren't. On what we call cars it's still not close. No doubt that day will come but already demand is cooling and sentiment surveys show a new hesitancy. With autos taking the first "strikes" a cool 20% rate may be just what is needed.
http://detnews.com/article/20100802/AUTO01/8020373/1148/rss25
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rffrydr
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| Posted: Wed Dec 30, 2009 10:14 am Post subject: |
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On this grade steady has been the climb--but perhaps too steady the stocks.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTMHHJ85sp1o
BTW the chinese market of $3800 vanettes split 50/50 with SAIC and all monies re-invested inside china did not "save GM." This works for GM as a platform into india and a Wall St. pitch.
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