Just a month after I accused SAIC (Shanghai: 600104) of having a weak stomach for overseas expansion, we’re getting word that China’s leading automaker may be preparing to move into Southeast Asia with its longtime US partner General Motors (NYSE: GM). If the reports are correct, this would look like a smart move for SAIC, taking it into a relatively straightforward region similar to its own home market in partnership with a globally experienced major partner like GM.
Tag Archives: Chery
Chery, With New JV, Heads to Market 捷豹路虎合资项目获批 奇瑞欲重启IPO
More than a month after struggling carmaker Chery first told the world that its joint venture with Jaguar Land Rover had received a government green light (previous post), China’s state planner has come out and announced its formal approval of the deal. But what caught my attention from the latest news reports were some of the details about the new venture’s plans, along with the more intriguing revelation that Chery is racing ahead with plans for an IPO to fund the project.
Cars: Volvo Sputters, GM Sails 中国汽车市场：沃尔沃遇阻 通用启航
The latest auto news bits show that domestic nameplate Geely (HKEx: 175) continues to struggle with its plans to resuscitate its Volvo brand, while General Motors (NYSE: GM) is banking on rapid growth for low-end cars to consolidate its position as China’s market leader. Meantime, I’d be remiss not to mention the latest news coming from sputtering domestic automaker Chery, which has disclosed its controversial plan for a joint venture with luxury car maker Jaguar Land Rover has just been approved by the key state regulator.
Jaguar Revs Up PR Drive for Chery JV 捷豹路虎为争取合资企业获批加大公关攻势
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.
Chery, Jaguar in PR Push for JV Approval 奇瑞、捷豹开展公关，争取合资企业获批
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.
Chery, Great Wall Hit Export Speed Bump 奇瑞和长城汽车遭遇出口障碍
Domestic car makers Chery and Great Wall Motor (HKEx: 2333) have hit a first major speed bump in their recent export drive, spotlighting the uphill road China’s big domestic brands will face as they look overseas to offset sputtering sales at home. Media are reporting that both companies have launched recalls for most of their cars sold in Australia after asbestos, a well-known carcinogen, was found in the engines and exhaust systems of some vehicles. (English article)
Caterpillar Joins China Export Crawl 卡特彼勒加入中国装备出口潮
US construction equipment giant Caterpillar (NYSE: CAT) is taking an interesting new direction in China, following in the path of a growing number of firms that once relied on domestic sales but are now turning their attention to exports to offset a slowing home market. China’s big domestic car makers like Chery and Geely (HKEx: 175) have also increasingly looked to exports to offset their rapidly slowing sales at home, where they face not only weakening demand but also stiff competition from more experienced foreign competitors like GM (NYSE: GM) and Volkswagen (Frankfurt: VOWG).
Dwindling Demand Fuels Car Inventory Build-Up 中国汽车库存增加或引发价格战
It’s the beginning of June, and that means it’s time for the nation’s automakers to release their monthly sales data that will undoubtedly show modest to moderate growth, with the possible exception of some domestic automakers that are suffering in the industry’s current slowdown. But the real picture could be far worse than those reports indicate, based on the latest cautionary words from the nation’s biggest association of auto dealers. Those words of caution from the China Automobile Dealers Association come less than a month after the group warned that inventories of unsold cars were rising above what is normally considered healthy levels at dealerships selling 3 of the nation’s top brands, Geely (HKEx: 175), Chery and BYD (HKEx: 1211; Shenzhen: 002594), as well as at Honda (Tokyo: 7267) dealerships. (previous post) That warning reflected the reality that auto manufacturers, whose monthly figures usually reflect shipments to dealers and not actual sales, were sending many more cars to their dealerships than the dealers were actually selling. The slowdown has gripped the entire market for much of the last 12 months, as car sales dropped off considerably after turbocharged growth in 2009 and 2010 fueled by incentives from Beijing. Now the same Auto Dealers Association is saying that inventory levels are rising at an alarming level, with the average level now at 60 days at the end of May compared with 45 days just a month earlier. (English article) An association executive said the rapid rise in unsold cars is unsustainable, and that dealers are being forced to sell vehicles at big discounts to prevent inventory levels from getting even higher. Most observers are expecting to see modest gains tomorrow when the association that tracks China automobile sales releases its monthly figures for May, which reflect shipments to dealerships. Some individual manufacturers have already reported their own May figures, including GM (NYSE: GM), which reported its May sales rose 21 percent on strength from 2 of its lower-end brands. While GM’s numbers may be relatively reliable, the same may not be true for some of China’s domestic players like Geely, BYD and Chery, which have continued to churn out new cars and ship them to dealers who then discover there is little or no demand for the product. Analysts are already predicting the inventory build-up will force those dealers to offer steep discounts, leading to price wars that could ultimately infect not only the domestic automakers but also the big global players like GM and Volkswagen (Frankfurt: VOWG) as well. Dealers are also likely to feel the pinch, with many potentially being forced out of business as they are forced to sell their inventory at a loss. On the whole, it looks automakers and their dealers could be facing a bloody summer ahead, with many of the domestic players being forced to idle large amounts of production capacity by the fall.
Bottom line: An unsustainable inventory build up at Chinese auto dealers will lead to bloody price wars in the summer, followed by sharp reductions in output for many domestic players in the fall.
Related postings 相关文章:
◙ Auto Inventory Builds, Pain Ahead for Domestics 中国低端车库存增加 本土车企面临苦日子
Auto Inventory Builds, Pain Ahead for Domestics 中国低端车库存增加 本土车企面临苦日子
The latest signs of trouble for China’s sputtering car industry are coming from some lower-end auto dealers, who are reporting a rapid build-up in their inventories even as manufacturers keep adding new capacity planned when the sector was booming 2 years ago. The current cycle looks like a classic case of looming oversupply, caused by a sharp jump in demand around 2009 that led manufacturers to invest billions of dollars in new production facilities that are only now coming on stream. Unfortunately for the automakers, the demand that helped to push China past the US to become the world’s biggest auto market has now started to stumble as Beijing takes steps to cool the nation’s overheated economy. The latest warning sign is coming from China’s largest car dealer group, the China Automobile Dealers Association, which is saying that dealers for 3 or China’s top domestic auto brands, Geely (HKEx: 175), Chery and BYD (HKEx: 1211), now have more than 45 days worth of inventory in their showrooms. (English article) In addition, Honda’s (Tokyo: 7267) China dealerships are reporting similar inventory levels, prompting the Japanese automaker to take the unusual step of closing its China joint venture for 15 days during the recent May Day holiday. The 45-day inventory mark is important because that’s the point at which dealers start to worry that they are not selling cars quickly enough, and thus may start to offer vehicles at big discounts in order to reduce their levels. That could potentially spark a round of price wars with other dealers, who will risk seeing their own inventories rise to dangerous levels unless they start selling their cars for big discounts as well. I’ve previously said that the big domestic auto brands are likely to suffer first in the current slowdown, as they don’t have the resources or variety of new models to compete with better-funded joint ventures backed by global heavyweights like Volkswagen (Frankfurt: VOWG) and General Motors (NYSE: GM). The domestic brands also traditionally sell to the very low end of the market, and thus don’t really compete with the big global names that tend to focus on the higher end. But recent moves into the lower end of the market by names like GM and Volkswagen could make the pain even worse for the domestic brands, and indeed Geely, BYD and Chery all reported sales declines in the first 3 months of the year. Right now the higher end of the market seems to be more stable than the lower end, meaning the big foreign car makers won’t feel the same pain as the domestics for perhaps another year. But look for most of China’s big domestic brands to slip into the red in the next 12 months, and perhaps for even 1 or 2 to close or combine with rivals as the industry embarks on a needed consolidation.
Bottom line: Inventory build-ups at car dealerships for BYD, Chery and Geely indicate a price war may soon break out at the lower end of China’s car market, pushing many companies into the red.
Related postings 相关文章:
◙ Car Sales: Domestics Down, But Not Out 汽车销量：国产车下降，接近拐点
◙ Jaguar-Chery: Veto Ahead 奇瑞联手捷豹路虎建合资厂料难获批
◙ China Slams the Brakes on Automakers 中国为汽车行业踩刹车
Luxury Cars Headed for Overheating 豪华车市场步入过热
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
Geely Joins Chery on the Export Road 吉利加入奇瑞的出口车行列
Faced with a slowing home market and stiff competition from foreign-backed rivals, China’s big domestic auto brands are increasingly looking to developing markets to revive their flagging sales, with Geely (HKEx: 175) the latest to jump on the export bandwagon. A company executive says Geely, which made headlines a couple of years ago with its purchase of Volvo, aims to overtake domestic rival Chery in the next 2 years to become China’s leading car exporter. (English article) Geely is joining Chery in the drive to overseas markets as growth in China’s domestic auto market, the world’s largest, has slowed dramatically over the last year after Beijing retired many buying incentives designed to boost domestic consumption during the global financial crisis. As the market has slowed, China’s “big 3” domestic nameplates, Geely, Chery and BYD (HKEx: 1211), all of which specialize in lower end cars, have lost steady share to other domestic rivals with big-name foreign joint venture partners. Those rivals are turning up the heat even more with a recent series of new initiatives to enter the lower end of the market, which traditionally was dominated by the domestic brands. (previous post) Under its aggressive export expansion plan, Geely will open factories this year in Belarus and Uruguay, adjacent to 2 of the world’s 5 BRICS countries, namely Russia and Brazil. Chery, which has opened one plant in Venezuela and is building another in Brazil, was China’s export leader last year with some 160,000 cars shipped abroad, and has seen strong overseas sales in the first 2 months of this year as well. From my perspective, this overseas strategy looks like a smart move as China is arguably one of the world’s most advanced countries in terms of designing and building reasonably high-quality cars costing less than $10,000 each — a combination preferred by many developing market white collar urbanites who often can’t afford the pricier models offered by big-name foreign companies like GM (NYSE: GM) and Volkswagen (Frankfurt: VOWG). GM has recently discovered the lower end of the market can be quite lucrative, developing its Chevy Sail specifically for China 2 years ago. Since its release, the Sail has become one of the nation’s best selling models, providing further headaches for the domestic nameplates. If they are smart, which appears to be the case, Chery, Geely, BYD and other export-minded domestic automakers will accelerate their overseas plans, as they should have a 2-3 year head start over the big foreign names. If they hesitate, they could easily run into the same foreign competitors in overseas markets that are already rapidly eroding their profits at home.
Bottom line: Geely’s acceleration of its export drive looks like a smart move, allowing it to leverage its expertise in low-end cars to quickly grow in other developing markets.
Related postings 相关文章:
◙ Nissan, VW Jump on China Brand Bandwagon 日产和大众进军中国低端车市场
