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China’s restless car market is showing signs of new stress, with automakers revving up spending at the nation’s top advertising auction this year as competition heats up and growth slows. Meantime, German car maker Daimler-Benz (Frankfrut: DAIGn) has already moved into the slow lane in recent years due to poor execution, but hopes to turn things around with a new ground-breaking tie-up with its main China partner, Beijing-based BAIC Motor. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 9. To view a full article or story, click on the link next to the headline.
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The following press releases and media reports about Chinese companies were carried on June 28. To view a full article or story, click on the link next to the headline.
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After years of relying on exports, China’s new focus on stronger domestic consumption to fuel economic growth is not only helping to diversify its economy but is also becoming a valuable new tool in its trade disputes with the West. Its major trading partners, most notably the US and Europe, may need to pay closer attention to China’s fast-growing domestic market when lodging new trade grievances in the future, or risk seeing their own exporters cut off from millions of increasingly wealthy Chinese consumers. Read Full Post…
Sexy pictures of concept cars are filling the headlines this week as China’s biggest annual auto show revs up in Shanghai, but the bigger story at this year’s event is a sudden and dramatic slowdown in the nation’s luxury auto market. The newspapers have been brimming these last 2 days with reports from the show that opened on Sunday, including copious pictures of all the new car models that will soon hit the roads of the world’s largest car market. But interviews with executives from the big luxury brands were nearly identical in their conservative tone, with most executives saying they would be satisfied to see growth this year of just 10-15 percent. Read Full Post…
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.
Six months after announcing their plans for a joint venture, fast-fading domestic car maker Chery and its high-end global peer Jaguar Land Rover are still anxiously awaiting approval for the tie-up from Chinese regulators who are taking their time making a decision. But the pair are hardly sitting idle as they wait for the verdict, and Jaguar in particular has launched a massive PR offensive to try to convince Beijing it is serious about China by showing its commitment to the market. That campaign has officially moved into the fast lane, with Jaguar officially launching a “Let’s Go China!” tour that will take its high-end cars and executives on a national trip to some of the nation’s biggest cities.
Six months after announcing their plans for a joint venture, fast-fading domestic car maker Chery and its luxury partner Jaguar Land Rover are playing a PR game as they try to get regulators to approve their tie-up. Both companies desperately want to see this venture move forward for their own reasons. Chery needs the venture to breathe new life into its business as it faces a growing number of setbacks both at home and abroad. Jaguar also desperately wants to boost its presence in the world’s fastest growing luxury car market, where the big German names are already well established and US giants Ford (NYSE: F) and GM (NYSE: GM) are also planning new initiatives.
I’ll wrap up this week with a couple of items from the car world, one of which has Japan’s Nissan (Tokyo: 7201) adding fuel to China’s looming auto glut while the other has yet another Chinese buyer helping forestall the long and tortured death of Sweden’s bankrupt Saab. My personal favorite among these 2 stories is Saab, as it’s quite a colorful saga; but Nissan is clearly the bigger of the items, so I’ll start with a look at the news that the Japanese automaker is planning to build a $785 million new plant in the northeastern port city of Dalian. (English article) The new plant is part of a broader plan to invest 30 billion yuan in China by 2015 previously announced by Nissan, China’s second biggest car brand and the most aggressive of Japan’s 3 major automakers in China. The new plant, being built together with Nissan’s China partner Dongfeng Motor (HKEx: 489), will initially have capacity to build 25,000 cars per year when it opens in 2015, but will expand rapidly to a a hefty 240,000 vehicles by 2017, according to a foreign media report, citing an unnamed source. This kind of rapid expansion, despite a recent cool-down in China’s auto market, is being seen throughout China’s auto industry, with most of the big foreign automakers including Ford (NYSE: F), BMW (Frankfurt: BMWG) and General Motors (NYSE: GM), all announcing major new initiatives over the last couple of years. I have no doubt that market growth will eventually accelerate again, and recent signs from Beijing indicate that could happen soon as it considers new incentives to boost sales. But the addition of new capacity for another 1 million or more vehicles looks a bit big to me for a market unlikely to sell more than 10 million vehicles this year; that means we could see lots of idle capacity in the next few years, forcing some weaker players, especially the domestic brands, to leave the market. Meantime, Saab, which is now in bankruptcy and hasn’t produced any cars since last year, is being sold to a Sino-Japanese partnership that plans to turn the brand into an electric car specialist. (English article) I’ve never heard of either the Chinese company, a Hong Kong-based firm called National Modern Energy Holdings, or the Japanese partner, Sun Investment. But I expect this pair are looking to buy the Saab name and perhaps some of its technology if the deal actually gets completed, and then they would probably shut down Saab’s money-losing Swedish operations completely. A more likely scenario would see this latest agreement collapse, just like an earlier rescue package that saw 2 other Chinese firms try and fail to buy the company. (previous post) Regardless of the final outcome, it does seem like the Saab brand may be destined to live on in China — an ironic development since the name is virtually unknown in the market.
Bottom line: Nissan’s latest plan for a massive new plant in northeast China marks the latest sign of a supply glut building for China’s auto sector.
Related postings 相关文章:
◙ Dwindling Demand Fuels Car Inventory Build-Up 中国汽车库存增加或引发价格战
Just a week after a top Chinese auto rental firm scrapped its plans for a New York IPO, another auto specialist, Yongda Automobile Services has also junked plans for a listing in Hong Kong, reflecting not only cooling overseas demand for Chinese IPOs but also the chill that is settling over the country’s auto sector. But the true test for offshore Chinese IPOs could still be coming, as insurance major PICC gets set for a mega-IPO in Shanghai and Hong Kong to raise up to $6 billion. Let’s look at the Yongda news first, which has seen the operator of China’s largest distributor of cars from luxury German automaker BMW (Frankfurt: BMWG) cancel its plans for a Hong Kong plan to raise up to $430 million due to anemic demand. (English article) The decision comes just a week after auto rental specialist China Auto also formally scrapped its plans for a New York IPO after originally filing for the offering back in January. (previous post) The failure of both of these IPOs reflects not only weak sentiment for new offerings in general, but also the anemic state of car sales in China, which passed the US in 2010 to become the world’s largest auto market but has seen growth slow dramatically over the last year as China’s economy slows. While the failure of China Auto’s IPO isn’t too surprising, the withdrawal of the Yongda listing was a bit more unexpected because sales of luxury cars like BMW seemed to be more immune to the slowdown in China. Thus this lack of investor interest seems to indicate that markets expect an imminent slowdown as well for the luxury segment, which is still seeing growth in the 30-40 percent range even as broader market gains have fallen into the low single digits. Meantime, People’s Insurance Company of China (PICC), one of China’s top insurers, is hoping to avoid a similar fate to Yongda by bringing more major investment banks into its dual listing plans. (English article) Foreign media are reporting the company has added 14 investment banks, including powerhouses like Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS), to the group underwriting the Hong Kong portion of its IPO aiming to raise around $3 billion from foreign investors. The addition of so many major foreign investment banks, combined with PICC’s strong state backing, means that this offering is very likely to go forward despite weak sentiment in the broader market, though I wouldn’t expect it to price very strongly and the final amount of funds raised in Hong Kong could be closer to $2 billion. One of the few Chinese companies to successfully make a major Hong Kong IPO in recent months was another insurance company, New China Life (HKEx: 1336), which raised $1.3 billion in the Hong Kong portion of a dual listing late last year. The company’s shares initially surged, but have since given back most of the gains and are now just slightly ahead of their offering price — roughly in line with the broader market. Given recent uncertainty in the broader insurance market, I wouldn’t expect too much excitement from this PICC offer though it should indeed go forward. When that happens, look for the stock to trade sideways or sink lower after its trading debut.
Bottom line: The scrapping of an IPO by China’s top BMW distributor and addition of major banks to a planned IPO for major insurer PICC reflect continued weak demand for new China offerings.
Related postings 相关文章:
◙ China Auto IPO Crashes 神州租车的IPO之梦告吹
◙ Ping An Returns to Market With Second Big Fund Request 中国平安拟发大规模可转债
◙ Year End Brings Problematic New IPO Wave 中国新一波IPO潮或无法达预期效果
China’s luxury car sector is showing all the signs of overheating, as both domestic and foreign auto makers spend hundreds of millions of dollars to invest in a vast consumer market whose fast growth makes it increasingly vulnerable to bubbles in many areas. As the annual Beijing Auto Show begins this week, news has emerged that Nissan (Tokyo: 7201) plans to start production of its Infiniti cars in China, seeking to tap strong demand for luxury brands in the world’s largest auto market. (English article) Nissan’s plan comes just a week after US auto giant General Motors (NYSE: GM) announced a similar plan to produce its own luxury Cadillac brand in China. (previous post) Even domestic names are getting in on the act, with brands like Geely (HKEx: 175) and Chery making recent moves that indicate they want to enter the space. It’s easy to see why all the luxury brands are piling into China, where a growing number of affluent consumers are happy to pay big bucks to show off their newly wealthy status. After two years of breakneck growth fueled by government incentives, China’s broader auto market grew by an anemic 2.5 percent last year as the nation’s economy slowed due to global weakness and cooling measures by Beijing. Despite that slowdown, luxury car sales continued to boom, notching solid double-digit gains for the year. That growth has continued into the first quarter of 2012, even as the broader market contracted 3.4 percent in the same period. First-quarter sales for industry leader Audi (Frankfurt: VOWG) jumped 40 percent, while rival BMW (Frankfurt: BMW), the market’s second largest player, also notched healthy growth of 28 percent. While Cadillac and Inifiniti prepare to start local production, the existing luxury players are also all investing big money on their own expansions. Audi currently plans to more than double its annual capacity to 700,000 units per year from the current 300,000, and BMW is embarking on a similar plan that will see it spend 1 billion euros. Adding to the looming glut is Beijing, which has shown a previous inclination to protect domestic industries and to intervene in markets that appear to be overheating. Beijing showed its intentions for the luxury car space earlier this year when it published a preliminary list of approved models for purchasing by government departments – a big buyer of such vehicles for status-conscious officials. (previous post) In what came as a surprise to many, the list excluded all foreign brands, a huge exclusion for government agencies that now purchase $13 billion in cars a year. That provision was designed to help domestic automakers, but also provided a clear signal that Beijing wants to clamp down on luxury vehicle purchasing by government agencies as it seeks to address public perceptions of corruption and wasteful government spending. There’s every indication that demand won’t be able to keep up with the current breakneck expansion of capacity for the luxury car market, both due to natural limitations as well as this kind of government intervention. When that happens, the big automakers will quickly find they’ve spent hundreds of millions of dollars to build massive new capacity that could end up sitting idle for years until demand finally catches up with the current big wave of new investment.
Bottom line: China’s luxury car market is in the process of overheating, which will leave automakers with large amounts of excess capacity when the market slows over the next 2 years.
Related postings 相关文章:
◙ GM Discovers China Luxury Market — Finally 通用汽车在华投产凯迪拉克 亡羊补牢犹未为晚
