News bits from the automobile space indicate the long-awaited IPO by Beijing-based car maker BAIC Motor may finally be coming soon, while the struggling Geely (HKEx: 175) is chasing a couple of distracting new initiatives in the electric vehicle and overseas markets. Let’s start with the BAIC news, as that looks the most interesting since it could provide investors with an interesting IPO opportunity later this year.
Tag Archives: BAIC
News Digest: February 2-4 报摘：2013年2月2-4日
The following press releases and media reports about Chinese companies were carried on February 2-4. To view a full article or story, click on the link next to the headline.
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- Daimler (Frankfurt: DAIGn) Buys Stake In Chinese Automaker BAIC Motor (English article)
- Geely (HKEx: 175) Buys Manganese Bronze For 11 Mln British Pounds (English article)
- Unilever (London: ULVR) Completes Global Skippy Sale Outside of China (Businesswire)
- Baidu (Nasdaq: BIDU) Finds New Ways To Freeze Out Qihoo (NYSE: QIHU) Browser (Chinese article)
- China Approves HSBC (HKEx: 5) Sale Of Remaining $7.4 Bln Ping An Stake (English article)
Dongfeng Joins China Own-Brand March 东风追逐中国民族汽车品牌复兴大潮
China’s domestic car makers are continuing their drive to develop their own brands in their search for bigger profits outside their foreign joint ventures, with Dongfeng Motor (HKEx: 489) the latest to join that march as it prepares to revive its mothballed namesake brand. But success for these new initiatives is far from guaranteed, and Dongfeng and the many other Chinese automakers to announce similar own-brand plans in recent months certainly aren’t preparing to abandon their lucrative foreign joint ventures anytime soon. Dongfeng itself recently launched another new brand, called Venucia, with longtime Japanese partner Nissan (Tokyo: 7201) (previous post); and more recently news has emerged that it is in talks for yet another foreign joint venture with France’s Renault (Paris: RENA). (previous post) According to a Chinese media report, Dongfeng is currently working on a plan to revive its namesake brand using technology from France’s Peugeot (Paris: UG), and could show the first models at the Shanghai Auto Show next spring. (English article) China auto buffs may want to have a look at this report, as it contains a detailed history of the Dongfeng name, which was China’s first self-developed brand with its launch in the late 1950s. But production of the car was short-lived, and the brand has been absent from Chinese roads now for more than half a century. Dongfeng’s plan follows a range of similar ones by other Chinese automakers, all of which also have successful joint ventures with major foreign automakers. News recently emerged that SAIC (Shanghai: 600104), China’s largest automaker which has joint ventures with GM (NYSE: GM) and Volkswagen (Frankfurt: VOWG), was planning to revive its Shanghai brand of cars. (previous post) At the same time, FAW Auto has been working on a 1.8 billion yuan plan to revive Hongqi, or Red Flag, a brand that was once synonymous with luxury cars in China but ceased production in the 1980s. Meantime, Beijing-based BAIC, which has a joint venture with Mercedes, is also rolling out its own brand cars based on technology it purchased from Swedish car maker Saab. Many of these plans have the common trait of using older foreign technology as their basis, which is probably a smart move as all of these Chinese companies are relatively inexperienced at developing their own new models. Still, launching a new brand is far from easy, as it requires new infrastructure to service such brands and also marketing campaigns to raise public awareness. What’s more, the market is already quite crowded and showing signs of slowing down. The Hongqi, Shanghai and now Dongfeng initiatives all look smart from a marketing perspective, as all will draw on well-known historical brands that should quickly grab attention from Chinese consumers. At the end of the day, I would expect some of these brands to succeed, with perhaps the Shanghai and Hongqi brands having the best chance for gaining some traction with domestic car buyers. The ones that fare worse will end up costing their developers big losses, and could easily see some of these older brands returned to the historical junk pile once again.
Bottom line: Dongfeng’s revival of its namesake brand is part of a trend by Chinese automakers to develop their own brands, with about half of these new initiatives likely to succeed.
Related postings 相关文章:
◙ 2 China Car Brands Set for Renaissance? “上海”和“红旗”汽车将重出江湖
Saab Rescue Gets New Life With Bank of China Role
The never-ending saga of a plan by 2 obscure Chinese firms to rescue dying Swedish automaker Saab has taken an interesting twist, with foreign media reporting that one of the Chinese partners has dropped out of the rescue group and been replaced by banking heavyweight Bank of China (HKEx: 3988; Shanghai: 601988). Under the original plan that stood little or no chance of success (previous post), the 2 Chinese firms, Youngman Lotus Automobile and Pangda Automobile (Shanghai: 601258), had been working for months on securing hundreds of millions of dollars in financing to rescue Saab, even as the Swedish company’s former owner, GM (NYSE: GM), was threatening to veto such a deal. I had said that even Youngman and Pangda could secure the necessary funding, their plan would ultimately get vetoed by Beijing due to inexperience of the 2 Chinese companies and Saab’s highly complex situation. But now the exit of Pangda and entry of Bank of China has completely changed the complexion of this rescue plan, and indicates that someone in Beijing may actually want to see the deal succeed. Foreign media say that under the deal now being discussed, Bank of China would replace Pangda, and collectively with Youngman would own just under 50 percent of Saab after providing their rescue financing. (English article) This new deal contains two elements lacking in the previous deal, giving it a much higher chance of success. From a financing standpoint, Bank of China’s participation guarantees the availability of needed funds, which are likely to run in the hundreds of millions of dollars. But perhaps more important, the participation of well-connected Bank of China gives the deal a much better chance of winning necessary government approval. Clearly Beijing has taken an interest in this deal, though I’m not sure why as Saab still has many structural issues that GM and others with much more experience failed to solve. Perhaps Beijing is just interested in Saab’s intellectual property, following the purchase 2 years ago of several older Saab model designs by Beijing automaker BAIC. Regardless of the reasoning, this latest rescue package looks to have a much better chance of success, meaning Saab may yet survive to see at least the end of 2012.
Bottom line: A Chinese plan to save Swedish automaker Saab stands a much better chance of success following the new entry of Bank of China into the rescue partnership.
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◙ 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
Luxury Cars Zoom, But Who Profits?
China’s formerly red-hot auto market looks set to stall this year, but you would never know that from looking at luxury car sales. The only problem from a domestic investor’s point of view is that the market is almost completely monopolized by foreign firms, Germans in particular. The country’s 3 top luxury car sellers, Volkswagen’s (Frankfurt: VOWG) Audi, BMW (Frankfurt: BMW) and Mercedes-Benz (Frankfurt: DAI) all saw their China sales rise 30 percent or more in the first 10 months of this year. (English article) That turbo-charged growth came even as the broader market stumbled and the country’s main industry association forecast just 5 percent growth for the year, as Beijing took steps to tame inflation and ease congestion on the nation’s busy roads. The logic behind the strong luxury sales isn’t hard to see. As China makes it more difficult for people to buy new cars through measures such as restricting new licenses and phasing out incentives for cheaper, more gas efficient models, a bigger percentage of sales will go to the luxury segment that is far less price sensitive. What’s more, luxury cars in China now account for just 8 percent of the total car market, compared with 10-20 percent in the West. Right now the best bets from China to capitalize on this trend are limited. Audi’s China partner, FAW Auto, isn’t publicly traded, and even if it was the brand looks set for a rough road as it rapidly loses share to its aggressive German rivals. BMW also makes cars in China with partner Brilliance China Automotive (HKEx: 1114), while Mercedes-Benz parent Daimler works with privately held BAIC, which has said for several years now it wants to make an IPO. BAIC has shown aspirations to build its own higher-end models with its purchase of several older models a couple of years ago from Swedish automaker Saab, which is now near death. Another interesting play could be Geely (HKEx: 165), which is trying to reposition its recently acquired Volvo nameplate as a luxury brand in China. (previous post) I’m dubious whether this plan can work, but if it does then Geely could see itself also in a strong position as sales of its more mainstream cars slow in this latest downturn.
Bottom line: The German automakers are best positioned to capitalize on China’s luxury car boom, but domestic names like BAIC, Brilliance China and Geely could also benefit.
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◙ China Autos Set for Long Slowdown
Foreign Spending Spree Augers Woes for China Car Makers 外国车企大举投资中国 本土车企倍感压力
Despite facing a sharp slowdown in the domestic auto market, foreign car makers are showing no signs of slowing down their investment in China — a trend that looks worrisome for big domestic names that are no doubt being forced to curb spending. In the latest development on that front, Chinese media are reporting that Germany’s Volkswagen (Frankfurt: VOWG), China’s largest auto brand with 13 percent of the market, has decided to boost its already sizable investment plan for China, now aiming to spend $19 billion from 2012 to 2016 from a previous target of $14.3 billion from 2011 to 2015. (English article) That expanded mega-investment plan comes as Ford (NYSE: F) and General Motors (NYSE: GM) have also earmarked major new dollars to boost their China investments, including recent symbolic commitments by both companies to boost their electric car development in the country. (previous post; Ford article) These kind of sharp spending increases during a downcycle reflect not only the longer-term vision that the foreign auto giants hold out for China, but also simply the fact that they have much better financial resources than their Chinese counterparts and realize that competition will only become more fierce as the market slows. By comparison, Chinese car makers are more likely to rein in their spending during the downturn, causing them to fall further and further behind their foreign rivals that already enjoy an edge in terms of consumer perceptions and product quality. All this bodes poorly for domestic firms like BYD (HKEx: 1211; Shenzhen: 002594), Chery, Geely (HKEx: 165) and BAIC, which have already seen their sales drop sharply and could see their position erode further amid aggressive foreign spending. I wouldn’t expect to see any of these car makers fail, as all enjoy strong support from local governments; but that said, look for their market share to fall sharply in the next 2 years until many become insignificant players in their own home market.
Bottom line: Aggressive spending by foreign car makers like VW and GM in China will cause domestic players to lose considerable market share during the current downturn.
尽管国内汽车市场大幅放缓，但外国汽车厂商却未显露出放缓对华投资的迹象，这一趋势似乎让很多不得不削减开支的国内大车企忧心不已。中国媒体近日报导称，德国大众汽车<VOWG_p.DE>决定加大对华投资，计划在2012-2016期间向中国投资190亿美元。该公司原计划在2011-2015年期间向中国投资143亿美元。大众汽车在中国拥有13%的市场份额。福特汽车<FN>和通用汽车<GM.N>也计划增加对华投资，近期两公司承诺将在华推进电动车开发。这种在市场低迷期间大幅增加投资的举动不仅反映出外国汽车巨头对中国市场持有的一种长远眼光，也反映出他们拥有优於中国车企的金融资源，且意识到当市场放缓时，竞争只会变得愈发激烈。与之形成鲜明对比的是，中国汽车厂商在经济低迷期间更可能会控制开支，造成他们更加落後于外国竞争对手。外国汽车厂商在消费者认可度和产品质量方面优於国内汽车厂商。所有这些对比亚迪<1211.HK><002594.SZ>、奇瑞汽车、吉利汽车<0175.HK>、北汽控股(BAIC)等国内企业都不是好消息。上述国内汽车厂商的销量已大幅下滑，面对外国车企的大举投资，其市场份额可能进一步受损。我不认为当中的任何一家企业会破产，因为这些企业都受到地方政府的大力支持，但我要说，他们的市场份额料将会在未来两年内大幅下滑，最终很多车企在国内市场中将无足轻重。
一句话：大众和通用汽车等外国汽车厂商大举投资中国将使国内汽车厂商的市场份额在目前低迷的环境中大幅下滑。
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◙ Two Generals Team Up in Latest EV Drive
◙ China Carmakers Lose a BRIC in Export Drive 中国汽车厂商的出口机会将逐步缩窄
Nissan Jumps on China Expansion Bandwagon, Overcapacity Ahead 日产加入中国市场扩张潮 未来料产能过剩
China seems destined for a big glut in its car-building capacity, with Nissan Motor (Tokyo: 7201) becoming the latest global auto maker to announce a major expansion in the market, with plans to spend $7.8 billion to nearly double its capacity over the next four years. (English article) This latest announcement between Nissan and Chinese partner Dongfeng (HKEx: 489), comes just weeks after Daimler (Frankfurt: DCXGn) announced a 2 billion euro expansion of its plant with Beijing-based BAIC (English article), and follows other similarly super-sized announcements by Ford (NYSE: F) and Volkswagen (Frankfurt: VOWG). The general tenor seems to be that most companies are planning to nearly double their China capacity over the next four years or so. The only problem is, growth in China’s auto market, now the world’s biggest, is slowing considerably from its turbo charged days of 2009 and 2010, when incentives from Beijing fueled the gains. With those incentives now gone and many cities actually rolling out dis-incentives for new car buying to ease congestion, most analysts are saying to look for annual growth of 10 percent at best over the next few years, and at worst little or no growth and possibly even contraction. So in a best-case scenario, we’d be looking at 40-50 percent growth in total demand over the next 4 years, while capacity will probably double over that period. The only outcome in all of this can be a massive supply glut, which could see the automakers’ China profits quickly evaporate as they are forced to lower prices to sell all those cars. I see a bit of consolidation in the cards, especially among the smaller domestic players without big foreign partners, who will most likely be forced out of business as losses mount. But the broader industry is certain to suffer overall, with China losing a bit of its luster as one of the world’s most profitable car markets.
Bottom line: Nissan’s new plan to nearly double its China capacity is part of a broader trend that will see the country end up with a major supply glut by 2015.
中国似乎是注定了要走向汽车产能大幅过剩之路。日本日产汽车<7201.T>日前加入全球其他大品牌的阵营，宣布在华扩张计划。该公司计划未来四年在华投资78亿美元，推动产能接近翻番。而就在日产与合作夥伴东风<0489.HK>宣布新计划几周前，戴姆勒<DCXGn.DE>与北汽也宣布20亿欧元的在华扩张计划，此前福特<F.N>、大众<VOWG.DE>等均有类似动作。主旨大概是：多数公司计划未来四年左右实现在华产能接近翻番。这里唯一的问题是，相对於2009年与2010年时的突飞猛进，中国车市增长速度现在正在放缓。中国当时的汽车激励政策现已不再推行，而且很多城市为了缓解交通堵塞问题，实际上实行了不鼓励购买新车的政策。为此，大多分析人士预计，未来几年中国车市最快增速为10%，差的话可能增速很低、不会增长或更甚者可能会萎缩。所以在最佳状况下，未来四年汽车总需求增速大约应为40%-50%，而同期产能则可能翻番。最後的结果只能是大幅的供应过剩，很多厂商被迫降价销售，在华利润迅速蒸发。我预计汽车行业将出现整合，尤其是那些缺少海外大牌合作的中国较小汽车厂商，亏损日增很可能最终会迫使这些企业关门大吉。而随着中国作为全球利润最丰厚车市的光环逐渐淡去，整个行业也必将在劫难逃。
一句话：日产的增产计划是随了大品牌在中国车市的产能扩张潮，这一趋势的结果应该是，到2015年中国车市供应过剩。
Related postings 相关文章:
◙ China’s Car Rebound: Price War Looming? 中国车市反弹：价格战越来越近？
◙ Cars: Less Restrictions and an Interesting Second-Hand Concept 汽车业：缓慢发展或成常态
◙ VW Motors into South China on Beijing Own-Brand Drive 大众汽车“南方战略”加速
