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China Car Sales Sputter Out of the Gate 中国汽车销售龙年遭考验

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China has just published its first monthly auto sales for 2012 and they aren’t pretty, boding poorly for the sputtering market in the Year of the Dragon. Of course, the figures for the month of January come with several major footnotes, most importantly the fact that sales were weak in 2012 as the Lunar New Year holiday fell during the month this year, whereas it fell in February for 2011. Still, the 16.5 percent decline in sales for the month marked the biggest decline in more than a decade, a sharp reversal for a market that was used to gains in the healthy double-digit percentage range for most of 2009 and 2010, and was still seeing healthy growth for most of 2011. (English article) Such a big decline means that just about everyone saw their numbers drop, with industry leader GM’s (NYSE: GM) sales down 8 percent for the month, about half the broader market decline. SAIC (Shanghai: 600104), GM’s main China partner and China’s biggest automaker, saw sales fall by a similar amount. The head of the association that compiles the results was quick to point out the Lunar New Year factor, and added that sales should increase by an even bigger 30 percent in Februrary, more than offsetting the January decline. He further added the China Association of Automobile Manufacturers predicts overall vehicle sales in China will grow about 8 percent this year, about double the growth rate of last year. The organization is usually quite conservative in its forecasts, and will argue that this year should see a return to more normal growth patterns after last year’s dramatic drop following the end of a wide range of government incentives designed to boost consumption during the height of the global downturn in 2009. But considering all the recent warning signs about rapidly slowing growth in Chinese consumption, I think the 8 percent forecast looks quite ambitious and would expect to see the figure revised downward several times, ending the year perhaps in the slight-growth range of 1-3 percent. As I’ve said before, the biggest victims in the slowdown will be domestic automakers without deep-pocketed foreign partners, with names like BYD (HKEx: 1211; Shenzhen: 002594), Geely (HKEx: 175) and Chery the most vulnerable. (previous post) I wouldn’t be surprised to see all 3 of these names slip into the red this year, nor to see one or 2 mid-sized players either become insolvent or simply get out of the business, in what will be a tough year ahead.

Bottom line: Weak auto sales for January, while influenced by timing of the Lunar New Year, foretell a difficult year ahead for the industry, with some top domestic names likely to slip into the red.

Related postings 相关文章:

◙  Cars: US, Germany Clobber Japan, Domestic Rivals 美德汽车在华完胜日本和中国车商

◙ China Slams the Brakes on Automakers 中国为汽车行业踩刹车

◙ Geely Choking on Volvo Debt, Weak Sales 吉利债台高筑

Qihoo 360 At Center of New Scandal 奇虎360陷入新的丑闻

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Qihoo 360 (NYSE: QIHU) seems to pride itself in its ability to make headlines, usually by touting user numbers that some believe are highly inflated, and the latest events that have propelled this company onto the front page just underscore its highly controversial nature. Qihoo, better known for launching assaults on others, both in the courtroom and in the business arena, saw its applications abruptly removed from Apple’s (Nasdaq: AAPL) China app store, amid allegations of manipulation of the ratings information posted by buyers of its apps. (English article; Chinese article) The reports are full of innuendo and of course Apple itself is refusing to comment, but the implication seems to be that Qihoo itself may have tried to manipulate the user ratings to make its apps look better than the ratings were otherwise saying. This would totally come as no surprise, as this kind of manipulation is relatively easy to do and can have a huge impact on sales. What’s more, Qihoo has shown little or no reluctance to use this kind of tactic in the past, and in fact this looks relatively benign compared to some of the other things it has been accused of over the years. Other reports have Qihoo implying that the manipulation that resulted in the ouster of its apps may have been engineered by one of its many enemies, with Internet leader Tencent’s (HKEx: 700) name frequently mentioned after the companies got in a major spat less than 2 years ago that also made national headlines. Of course, as all this is happening, Qihoo is also coming under attack from a small US research house, Citron, which has mounted a campaign for several months now accusing the company of vastly overstating its user numbers. (previous post) Qihoo’s shares took a slight hit overnight, dropping 4 percent to around $17 in US trading on Tuesday after reports of the latest spat came out. Qihoo has vowed to have its apps back in Apple’s China app store in the next 24-48 hours, though I suspect the company will get a severe lecturing from Apple if the manipulation allegations are the source of the removal, and it could be a week or longer before the apps return. At the end of the day, this particular development isn’t all that significant by itself, but is just the latest piece in a stream of news that reveals the true nature of Qihoo, which will ultimately serve to undermine confidence in the company and its stock.

Bottom line: The latest brouhaha over the removal of Qihoo apps from Apple’s China store underscores the company’s credibility issues, which will ultimately hurt both its reputation and stock.

Related postings 相关文章:

◙ Citron Keeps Up Qihoo Assault 香橼继续攻击奇虎

◙ Web Security: Qihoo Sputters, NetQin Surges

◙ Report Takes Wind Out of Inflated Qihoo 奇虎遭遇Citron釜底抽薪

Alibaba: Let’s Get This Show Finished 阿里巴巴和雅虎赶紧“离婚”吧

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Let’s get this story finished and move on! I don’t mean to sound impatient, but that’s my first reaction on reading the latest reports about Alibaba’s endless saga in its quest to buy out the 40 percent stake in itself held by Yahoo (Nasdaq: YHOO). I realize this deal involves a big amount of money, possibly as much as $10 billion, but that said, it’s also quite straightforward since the 2 companies have essentially no shared assets and thus literally all that’s needed is agreement on a price and then for Alibaba to find the financing. According to the latest reports, Alibaba and Yahoo have finally entered into serious discussions, following Yahoo’s naming of a new CEO last month, and the 2 sides fully expect to reach an agreement by mid March. (Chinese article) I personally can’t wait until they  announce a deal, as it will finally mark the end of a major corporate marriage that started with lots of promise, only to see things sour and end with a divorce that has taken way too long to reach. I’m probably being a little unfair here, as a final deal was unlikely to happen until Yahoo finally named a new CEO to replace Carol Bartz, who was a major source of friction between the 2 companies and whose firing last year finally set in process that will finally see Alibaba get its long-sought divorce. From Alibaba’s perspective, the sooner the settlement comes the better, as the divorce has become way too big a distraction as the company hopped from one crisis to the next at many of its core businesses last year, including its oldest B2B Alibaba.com (HKEx: 1688) site and its promising Taobao Mall, both of which were rocked by scandals that they are still recovering from. For its part, Yahoo also needs to put this story behind it and get to work trying to resuscitate its struggling search business, once a pioneer in the sector but which later lost its way as global giant Google (Nasdaq: GOOG) stole most of its business. A final settlement will not only end the hostilities, but will also leave Yahoo with a nice pile of cash to use to rebuild its business. It will also leave Alibaba with a pile of shares it can sell to more passive investors who are interested in its strong growth potential without wanting a strong say in its bigger management decisions. All that said, my final word to both sides, at least for now is: Let’s really try to end this saga by the mid-March deadline. Believe me, you won’t be the only ones celebrating!

Bottom line: The world will celebrate with Alibaba and Yahoo when they finally finish their divorce, ending an unhappy chapter for both companies that dragged on way too long.

Related postings 相关文章:

◙ Yahoo, Alibaba Dance Nears Finale　　雅虎应与阿里巴巴撇清干系

◙ New Loan Brings Alibaba Value Into Focus

◙ Alibaba Scrambles to Prove High Valuation 阿里巴巴高估值或将作茧自缚

Yum, Starbucks Forge Ahead in Face of Slowdown 百胜和星巴克逆势强劲增长

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The signs of economic slowdown in China are growing louder by the day, but you would never know it from looking at the latest bullish news from 2 of the country’s top restaurant operators, Yum Brands (NYSE: YUM), operator of the KFC and Pizza Hut chains, and upscale coffee seller Starbucks (Nasdaq: SBUX). It seems like the Chinese papers are filled these days with more forecasts of gloom as China’s exporters take a hit from sluggish demand in their 2 biggest markets, the US and most notably the European Union as it struggles through its debt crisis. Today the papers reported that retail sales during the week-long Chinese New Year holiday posted their weakest gain since 2009 at the height of the financial crisis. Despite that, Yum reported that sales at its China restaurants, consisting mostly of KFCs, grew 21 percent in the fourth quarter, while its operating profit for the country was up 15 percent, far better than the figures for its global business as a whole. (English article) While Yum was announcing its strong China sales, Starbucks was also announcing its own latest China initiative, this time a joint venture with a local Chinese partner to export coffee from southwestern Yunnan province, China’s only coffee growing region. (company announcement) This particular announcement looks a bit PR-ish, clearly designed to show Starbucks’ commitment to a market that is showing every sign of soon becoming its second biggest behind only the US. Still, the joint venture could actually earn some money from other markets interested in the exotic factor of buying coffee from China, not traditionally known for its coffee. What will be interesting to watch in the months ahead is whether both KFC and Starbucks start to see some of their spectacular China growth slow as the nation’s broader economy slows down. I expect we may see some mild slowdown, but that the strong growth should largely continue unabated. The phenomenon is similar to what we’re now seeing in the auto industry, where overall growth has slowed sharply after Beijing ended many incentives to boost that market. But within the industry, domestic automakers have seen their growth drop much more rapidly than their international rivals, which have more resources to survive the downturn and enjoy a better reputation in the market. I suspect something similar will happen in the restaurant sector, with independent eateries set to suffer the most in the coming slowdown, while the big chains will be better equipped to weather and even thrive in the storm.

Bottom line: Yum, Starbucks and other major restaurant chains should be able to keep up strong growth even as China’s economic growth slows, while local eateries will be hit hardest.

Related postings 相关文章:

◙ Little Sheep Gets Swallowed: Good for Yum, Good for China M&A 小肥羊被收购对百胜和中国是双赢

◙ Starbucks Raises Prices, But Who Cares? 没人会在意星巴克提价

◙ Starbucks Goes Downmarket in China Drive 星巴克在华开拓低端市场

7-Eleven Aims for Online Convenience 7-11便利店旨在线上便利业务

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The convenience store phenomenon has had decidedly mixed results in China, which makes a new expansion plan by global leader 7-Eleven look quite intriguing. According to the plan, 7-Eleven, a relative latecomer to the China market, is aiming to do what few of its rivals have done to date and tap into the vast potential of China’s mid-sized to smaller markets by using an online approach. (Chinese article) First let’s look at the reality on the ground. For some reason, and I’m not entirely sure why, Shanghai seems to be the only city in China where the convenience store concept has truly taken off so far. Even Beijing has far fewer convenience stores than Shanghai, where just about every corner is home to a 7 Eleven or one of its many rivals, including names like FamilyMart (Tokyo: 8028), Kedi and Alldays. Perhaps Shanghai’s European heritage is a factor, as the city’s narrow streets lined with block after block of apartment buildings probably provide the ideal climate for convenience stores, unlike more traditional Chinese cities with wide avenues and more spread-out housing inside gated compounds. Whatever the reason, this new plan by 7 Eleven looks intriguing, aiming to draw on China’s growing fascination with anything e-commerce to bring the convenience store concept to the masses. There are just a few questions I would have on whether convenience store shopping is suitable for e-commerce. One is that many convenience store purchases tend to be impulse buys, often for bottled drinks, so I’m not sure that people would want to wait an extra half hour to have such a drink delivered to their home when they’re feeling thirsty. The other is cost, as the cost of delivering that bottled drink could easily turn the transaction into a money-losing one from a profitable one. All that said, convenience stores do indeed seem to be missing a great expansion opportunity in China, and the company that can find the right formula could easily find itself sitting on a goldmine. I would give this 7 Eleven initiative a 60 percent chance of success, in which case it could soon claim the title as the nation’s convenience store king despite its relatively late arrival to the market.

Bottom line: 7 Eleven’s plan to expand in China using an e-commerce model could be a smart way to bring the convenience store concept to China’s masses, with a 60 percent chance of success.

Related postings 相关文章:

◙ Post Office: A Good E-Commerce Play 中国邮政分拆速递物流可谓电子商务”妙招

◙ Price Wars Beat Up Online Retailers 网上零售商引爆价格战

◙ New Regulatory, Competitive Waves Hit E-Commerce 监管和竞争冲击电子商务领域

2 China Car Brands Set for Renaissance? “上海”和“红旗”汽车将重出江湖

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A couple of reports in the China Daily this morning are saying that 2 iconic Chinese car nameplates, the Shanghai and Hongqi brands, could both be poised for comebacks soon in what looks like an interesting new prospect for the domestic auto market. If they go ahead with the plans, the reintroductions of Shanghai brand autos by SAIC (Shanghai: 600104), and Hongqi cars by FAW Auto could actually stand a reasonable chance of success, banking on nostalgia among Chinese consumers and both companies’ growing expertise at making dependable cars with solid demand after years of working with foreign partners. According to the China Daily, SAIC listed a Shanghai brand model in a recent catalog, and a company insider confirmed plans to revive the brand, which ceased production in 1991 as China’s largest automaker focused its energies on its 2 main joint ventures, one with GM (NYSE: GM) and the other with Volkswagen (Frankfurt: VOWG). (English article) Meantime, FAW is moving ahead with a 1.8 billion yuan plan of its own to develop a high-end Hongqi model that should go into volume production at the end of this year, with annual production set to rise to 30,000 units next year. (English article) The Shanghai-brand models sound aimed at the middle of the market, while the Hongqi — once considered China’s premier auto brand — is clearly aimed at the booming market for luxury cars. So the question becomes: are Chinese consumers prepared to spend the same money they usually reserve for big foreign names on domestic brands? My answer would be a “yes”, but only if they play their cards right, which could be a tricky proposition. A key element to success would be the nostalgia factor, meaning the companies would have to build a strong element of history into any marketing campaigns for the relaunch of these 2 brands — not something that either company has much experience in. Secondly, both companies will have to build models that are equally reliable and attractive to offerings from their foreign-branded joint ventures, and probably price them 10-20 percent below such comparable models. Again, this should be possible, but it will also require some effort and risk taking. Still, I’m cautiously optimistic that both of these initiatives could stand a chance for some reasonable success in the next 1-2 years, providing some refreshing and interesting new alternatives for a China auto market now dominated at the middle- and upper ends by big-name foreign brands.

Bottom line: Relaunches of the Shanghai and Hongqi auto brands could succeed if their manufacturers design interesting models and use the nostalgia factor in their marketing.

Related postings 相关文章:

◙ Chery Finds Foreign Partner in Jaguar 奇瑞与捷豹路虎联姻前景堪忧

◙ Cars: US, Germany Clobber Japan, Domestic Rivals 美德汽车在华完胜日本和中国车商

◙ China Slams the Brakes on Automakers 中国为汽车行业踩刹车

Tudou-Sina Tie-Up: More to Come？ 土豆网联手新浪

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Five months after buying a 9 percent stake in Tudou (Nasdaq: TUDO) shortly after its New York IPO, Sina (Nasdaq: SINA) has just announced its first tie-up with the online video site, China’s second largest, in what looks like the first of more to come, perhaps ending with the biggest tie-up of all, an outright acquisition. Under their first tie-up announced late on Friday, the 2 companies have launched a platform allowing sharing of Tudou videos on Sina’s popular Weibo microblogging platform. (English announcement; Chinese article) This particular tie-up looks quite interesting, as it combines Tudou’s rich online video library with Weibo’s 250 million users to create a potent platform that would be extremely attractive to advertisers — one of the main income sources both companies are relying on in their search for sustained profits. This combination could not only help Tudou steal advertising dollars from rivals like Youku (NYSE: YOKU) and Sohu (Nasdaq: SOHU) video, but could also help Weibo chase dollars now going to traditional social networking sites like Renren (NYSE: RENN) and Kaixin, as this kind of online video offering will give it a more traditional SNS feature. Sina shares didn’t do much after the news came out, actually dropping a bit despite a rise in the broader market. But more interesting was the reaction in Tudou shares, which jumped 16 percent to $16.25 — a healthy gain although still far below the $29 that Tudou sold shares for in its IPO last August. That jump is certainly fueled in part by excitement over this new deal, but another major factor is also growing expectation that Sina may make an outright offer for the company in the not-too-distant future. Such an offer would make sense for Sina, which needs a video offering to better compete with Sohu and looks like an increasingly important piece in general for a diversified web portal. From Tudou’s perspective, a merger would instantly give it access to Sina’s huge user base, both through its core portal business as well as subsidiaries like Weibo. Of course the major sticking point could be price, assuming Tudou Chairman Gary Wang wants to sell, which is far from certain. But even if he wants to sell, he may be loathe to part with his company for less than its IPO price, which would be a hefty 80 percent premium to its last closing price. Still, this kind of a merger looks almost too logical for either side to ignore, and I wouldn’t be surprised to see Sina either significantly increase its stake or buy Tudou outright by the end of this year.

Bottom line: A new tie-up between Sina’s Weibo and Tudou looks like a smart for both sides, and could pave the way for the former to acquire the latter by year-end.

Related postings 相关文章:

◙ Sina Taps On Back Door Into Tudou 新浪可能收购土豆

◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市

◙ Tudou IPO Set to Stumble Out of the Gate 土豆上市首日难有精彩表现

E-Commerce: 360Buy Awaits IPO Window, Amazon Expands 京东IPO融资心切 亚马逊物流扩张加剧竞争

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There are a few interesting items out there on the e-commerce space, where local giant 360Buy continues to ready itself for a New York IPO while global giant Amazon (Nasdaq: AMZN) continues its China expansion but is also learning just how price sensitive local consumers can be. Let’s look first at 360Buy, which also goes by the name Jingdong Mall. The company made headlines last year when it received a $1 billion investment from a group that included Russia’s Digital Sky Technologies (DST), which estimated at that time that 360Buy could be worth $10 billion. (previous post) Since then, the company has been locked in a series of cutthroat price wars in the overheated e-commerce space, most notably with Dangdang (NYSE: DANG), causing it to burn through a big portion of its cash and announce last fall it was preparing for a New York IPO, even though it was still losing big money. (previous post) Now Chinese media are reporting the company has been quietly bringing in a new group of professional top-tier managers as it still readies for the IPO despite several delays. (Chinese article) I’m sure that 360Buy desperately needs cash from the IPO, and that it is just waiting for 1 or 2 Chinese companies to make successful offerings before filing its own prospectus. That said, we could see this offering take place as early as March or April if market sentiment improves. Meantime, media are reporting that Amazon is continuing its aggressive China expansion by opening a new logistics center to serve the Tianjin-Beijing area, following its opening of another massive center near Shanghai last fall. (English article) But I was also amused to read another report that the company is adding a delivery fee to all orders under 29 yuan, in what clearly looks like some frustration at the small size of orders from many Chinese consumers. (Chinese article) My advice to Amazon would be to be careful, as it risks raising the ire of Chinese consumers with this kind of move, and everyone knows that upsets Chinese Internet users are quite effective at running negative backlash campaigns.

Bottom line: Cash-starved 360Buy could launch its IPO as early as March, while Amazon’s rapid expansion will add even more competition to the market.

Related postings 相关文章:

◙ 360Buy IPO: Let the Delays Begin 京东商城放缓IPO进程

◙ Amazon Name Shift Signals China Ramp-Up 亚马逊改名背后折射中国野心

◙ More Stumbles for Saab Rescue, 360Buy IPO 搭救萨博和京东商城IPO两计划注定命运多舛

News Digest: February 3, 2012 报摘： 2012年2月3日

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The following press releases and media reports about Chinese companies were carried on February 3. To view a full article or story, click on the link next to the headline.

══════════════════════════════════════════════════════

◙ Jaguar Land Rover Said to Plan Partnership With Chery to Expand in China (English article)

◙ Unicom (HKEx: 762) Studies Structural Change, Some Sub-Provincial Units to Use Vertical Mgmt (Chinese article)

◙ Amazon China Opens Tianjin Operations Center (English article)

◙ WuXi Pharmatech (NYSE: WX) Profit Margins Dwarfing U.S. Lead China’s Drug Deal Targets (English article)

◙ China Publishes Full List of IPO Applicants For 1st Time (English article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Solar: New Tie-Ups as US Ruling Looms 光伏产品倾销裁决临近 中国企业忙于外联公关

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There are a couple of new tie-ups in the solar space as the US prepares to levy punitive tariffs for China-made panels, one involving Chinese oil giant CNOOC (HKEx: 883) and another involving industry leader Suntech (NYSE: STP). Let’s look at the big picture first, which has Chinese media reporting the US will make its final decision on whether to levy the tariffs on March 2. (English article) I have no doubt that the US will rule against the Chinese solar panel makers, resulting in punitive tariffs for all Chinese panels imported to the US since December 3. That date is important, because Chinese solar firms started exporting huge numbers of their cells to the US in the fourth quarter in anticipation of punitive tariffs, so at least some of those exports will be subject to the new tariffs. I forsee turbulence in the market as China and the US work through this issue, which is likely to end in a settlement around year end that will see China end many of the subsidies that are the source of the complaint, such as low-interest loans and cheap land. Meantime, China companies have embarked on a PR campaign to show the world they don’t receive unfair subsidies and that it’s in everyone’s interest to continue setting up new solar plants. The 2 new tie-ups look at least partly related to that PR campaign. In the first, CNOOC will put $300 million into a new joint venture with Spain’s Isofoton to build new solar plants in Asia using Isofoton panels manufactured in China. (English article) This new venture by a major Chinese state-owned company seems aimed at showing that China supports not only its own homegrown solar companies, but anyone that wants to manufacture solar cells in China. The second tie-up, which looks largely symbolic, involves a new Suntech tie-up with US chemicals giant DuPont. (company announcement) I read the announcement twice and am still unsure what it means, as the language is quite vague. But it does make special effort to point out that the US was a net exporter of materials used to make solar panels last year, reinforcing a previous message that US firms will also be hurt by punitive tariffs. Look for more tie-ups throughout the year, some strategic to avoid US tariffs and others more PR in nature, as the 2 sides work through this issue and hopefully reach a settlement after the US presidential election in November.

Bottom line: 2 new solar tie-ups involving Chinese firms look like PR moves aimed at diffusing a trade war that could come to a head with the US issue of punitive tariffs next month.

Related postings 相关文章:

◙ Solar Slips Squarely Into the Red 太阳能行业陷入全线亏损

◙ LDK’s German Buy: Two Losers Combine 赛维LDK收购Sunways将使前者境况雪上加霜

◙ China Retaliates With Own US Solar Probe 中国启动对美可再生能源补贴调查

Spreadtrum, Samsung in Latest China 3G Model 展讯与三星再度联手开发中国标准3G智能手机

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After surviving a short seller attack last year, cellphone chip maker Spreadtrum (Nasdaq: SPRD) has taken the latest step in its drive to become a specialist in smartphone chips for use with China’s homegrown 3G standard, TD-SCDMA, by co-developing a second model with global giant Samsung (Seoul: 005930). (company announcement) Samsung’s roll-out of the Galaxy Note GT-I9228, using a Spreadtrum TD-SCDMA chip, is the Korean company’s second such model since last September, and signals the companies are forming a strong partnership for phones based on the 3G standard being used by China Mobile (HKEx: 941; NYSE: CHL). Now, of course, the big question will be whether China Mobile will start to promote TD-SCDMA service more aggressively, following a disappointing 2011 that saw it lose steady share in the 3G market to rivals China Unicom (HKEx: 728; NYSE: CHU) and especially China Telecom (HKEx: 728; NYSE: CHA). Spreadtrum shares have gone on a roller coaster ride over the last year, partly due to the inherent risk of investing so much in a technology with no track record and one that could ultimately see only lukewarm sales. Its share plunged in July after a short seller attack questioning an inventory buildup as the company broadened its product line as part of its TD-SCDMA bet. It ultimately survived that attack and its shares more than doubled from their lows at that time. But since November its shares have again lost about half of their value, due at least in part to disappointment about China Mobile’s lackluster promotion of 3G. Of course, part of the problem for China Mobile has been a lack of exciting smartphone models to run on its 3G network, so the introduction of 2 Samsung TD-SCDMA models should help address that problem. China Mobile has also sent out its own recent signals indicating it will make a stronger push in 3G this year under new management, though we have yet to see much real results of that. (previous post) If you’re a Spreadtrum investor, you’re most likely going to be closely watching China Mobile’s 3G subscriber numbers closely this year, as the chip maker’s stock price is likely to move in step with how quickly the network develops.

Bottom line: Spreadtrum’s latest tie-up with Samsung affirms its commitment to TD-SCDMA 3G standard, putting it at the mercy of China Mobile’s promotion of the untested technology.

Related postings 相关文章:

◙ China Mobile 3G: Where Are the Subscribers? 中国移动3G：订户在哪里？

◙ Spreadtrum, Mediatek in Cheap Smartphone Plays

◙ Spreadtrum Takes Smart Gamble on China 3G