Tag Archives: General Motors

Geely Leans on Struggling Volvo 吉利依靠处于困境中的沃尔沃

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While most of China’s top automakers are relying on partnerships with major global brands to help get them through a domestic downturn expected to last for the next 1-2 years, Geely (HKEx: 175) is taking an interesting approach by turning to the struggling Volvo, with plans for a new joint venture. (English article) First off, I have to say that this is the first time I’ve heard of a company forming a joint venture with itself, since Volvo has been 100 percent owned by Geely since the Chinese automaker’s landmark purchase of the Swedish company 2 years ago. But perhaps more importantly, Volvo is a struggling, second-tier name that lacks the resources to be an effective partner for Geely, which itself is trying to bolster its China market position even as it struggles under a mountain of debt that it took on to buy the Swedish car maker. Let’s look quickly at this newly announced deal, which will see Geely and Volvo team up to develop a new brand for the China market, following a similar strategy by General Motors (NYSE: GM), which has launched a new brand, Baojun, with Chinese partner SAIC (600104), specifically for the China market. The big difference in this case is that Geely itself is already a well known Chinese brand, and I’m not sure why the company — whose resources are already quite stretched — is choosing to develop a new brand instead of focusing on reviving both its own Geely name as well as Volvo’s. Geely previously announced plans to set up 2 major new Volvo car manufacturing plants in China in a bid to boost its sales, and some of the reports are saying the establishment of this new joint venture may be partly designed to satisfy regulatory requirements in order to get the 2 new factories approved. Still, the plan to introduce a new brand, and also plans to develop green cars at the joint venture, seem like a total waste of resources for both Geely and Volvo, and will only lead to more operational and financial distractions just when the company should be focusing on its core Volvo and Geely brands. In fact, this latest plan is just the latest sign of a company in disarray following the Volvo purchase, which sadly is becoming normal for Chinese firms that buy struggling, major global assets at bargain prices, only to discover it’s much easier to buy such assets than to repair them. That said, this development of a new brand looks completely misguided, and is just the latest step of Geely’s downward spiral that could seriously damage the company.

Bottom line: Geely’s plans to form a joint venture with its Volvo arm is the latest sign of disarray for the former high-flyer, boding poorly for its future over the next 2-3 years.

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

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

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

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

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2011 sales data for 2011 has been trickling out for the past week from the various car makers in China, showing US and German names made big gains last year at the expense of Japanese and domestic rivals, who could face a continued uphill battle in the coming year. General Motors‘ (NYSE: GM) China sales rose 8.3 percent last year to a record 2.55 million vehicles, while Ford (NYSE: F), a later arrival to the market, said its sales grew 7 percent to 519,390 units, according to company statements. (English article) Both figures were about twice the growth rate for the broader market, which is expected to come in at around 4 percent, the slowest in more than a decade as Beijing ended a wide range of incentives that led to a boom in 2009 and 2010, pushing China past the US to become the world’s largest car market. German car makers like Volkswagen (Frankfurt: VOWG) and BMW (Frankfurt: BMWG) also posted strong gains, with Volkswagen’s sales up 14 percent for the year, as they profited from strong demand for luxury models and a broader demand for quality as consumers reined in their spending. Gains by the US and German car makers came at the expense of the Japanese and domestic names, with Toyota (Tokyo: 7203) posting 4 percent growth while Honda (Tokyo: 7267) sales actually fell 4.5 percent, as they struggled with shortages and other operational issues after the big March earthquake in Japan. Meantime, domestic names like Geely (HKEx: 175), Chery and BYD (HKEx: 1211; Shenzhen: 002594), have also struggled to compete with the big global names as the market slows due to their more limited resources and reputation for less dependable quality. Japan’s car makers will most likely bounce back a bit in 2012 as earthquake-related issues recede, and could return to market-level growth rates that will likely be in the single digits this year. But 2012 could provide a much bumpier road ahead for the domestic nameplates, which will continue to lose market share to their strong foreign rivals as competition in the market intensifies.

Bottom line: US and German carmakers will continue to gain share in China’s auto market this year at the expense of domestic names, while Japanese players should see their positions start to stabilize.

Related postings 相关文章:

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

◙ Luxury Cars Zoom, But Who Profits?

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

US, China in Auto Tit-For-Tat Tariffs 中美贸易战若升级将两败俱伤

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In what should come as a big surprise to no one, China has singled out cars imported from the US for special duties after the US took similar action against Chinese-made tires in response to an anti-dumping complaint. This kind of tit-for-tat punitive tariff is relatively common and usually doesn’t do much damage as the amount of product affected is small, but in this case it provides some sobering insight over what could happen if another looming trade war involving solar cells escalates. In this latest instance, China will slap extra duties of up to 13 percent on US-made cars from GM (NYSE: GM) and Chrysler, and will even impose smaller punitive duties on cars made in the US by German auto makers like BMW (Frankfurt: BMW) and Daimler (Frankfurt: DAI). (English article) The move seems mostly symbolic, as the top 2 US automakers, GM and Ford (NYSE: F), already manufacture most of their models for the China market in China through their various joint ventures. Both the US and China are usually careful to keep these kinds of trade wars from getting out of control and affecting their broader economic relation, but a looming battle over alternate energy could soon test that formula, with the potential to blow up into a much bigger war that could deal a sharp setback to the drive to develop clean, renewable energy sources. Regular readers will know that of course I’m talking about the US investigation into unfair subsidies for Chinese solar cell makers, which now account for more than half of the world’s output, due in part to strong support from Beijing. A group advising the US body conducting the investigation has already determined that Beijing unfairly subsidizes its solar panel makers and recommended the levying of punitive tariffs, which are likely to come sometime early next year. Beijing has already hinted that it could retaliate with its own punitive tariffs for US-made polysilicon, the main ingredient used to make solar cells. That kind of escalation will ultimately benefit no one, either in the US or China, and could even deal a huge setback to a global solar industry already struggling through a sharp downturn.

Bottom line: China’s punitive levies against US cars looks like a retaliatory move for similar tariffs by the US against Chinese tires, and is unlikely to have any major impact on US automakers’ China sales.

Related postings 相关文章:

◙ 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

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

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

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What a difference a year makes, at least if your name is Geely, the company that was China’s pride last year when it purchased struggling Swedish automaker Volvo. The blogosphere has been buzzing the last 2 days after Chinese magazine Securities Weekly reported the company, whose Hong Kong-listed unit Geely Automobile (HKEx: 175) shares are down by half this year, is struggling under a mountain of debt now totaling 71 billion yuan, equal to about 73 percent of its assets. (Chinese article) The report prompted Geely to say it is capable of paying back the debt, and blasted the magazine for harming its image. Geely said earlier this year that Volvo’s sales in the first half of the year rose 20 percent and that it reported a $190 million operating profit. (previous post) But Volvo is in all likelihood still losing lots of money on a net basis, meaning it can’t really help to pay down the big debts that Geely is now carrying. Furthermore, Geely’s own profitable operations in its home China market are also starting to show signs of trouble, as the broader domestic auto market slows following nearly 2 years of blockbuster growth fueled by economic incentives from Beijing to boost consumption during the global economic crisis. As the industry slows, domestic names like Geely, Chery and BYD (HKEx: 1211; Shenzhen: 002594) are taking the biggest hit, as all have far fewer resources to weather such a downturn compared with rivals that operate joint ventures with big international names like Ford (NYSE: F), Volkswagen (Frankfurt: VOWG) and General Motors (NYSE: GM). Geely reported last week its October sales fell 10 percent from a year earlier, even as the broader market grew slightly (English article), and I suspect we’ll see more declines in the months ahead. All this could further strain Geely’s ability to repay its debt, which could force the company into a painful restructuring if things at Volvo and its domestic operations don’t improve quickly.

Bottom line: Geely could be headed for a painful restructuring, as it suffers from falling sales and a mountain of debt from its landmark Volvo purchase last year.

Related postings 相关文章:

◙ 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

◙ Geely-Volvo: Good First Year, But Fork in the Road Ahead

◙ Potent Partners Lift SAIC in Wobbly Times 动荡时期 合作夥伴撑起上汽的业绩

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

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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。

Related postings 相关文章:

◙ 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

◙ Message to Saab: Don’t Count on China 萨博不应指望中国注资

Two Generals Team Up in Latest EV Drive

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There’s been a flurry of news on the electric vehicle (EV) front these last 2 days, as China enlists US heavyweights General Motors (NYSE: GM) and General Electric (NYSE: GE) to try and jumpstart the country’s sputtering drive to environmentally friendly cars. But despite the hype, the two latest initiatives look largely symbolic to me, and it’s hard to tell if either will have much impact. One deal will see GM and Chinese partner SAIC (Shanghai: 600104) step up their EV development, with GM making vague promises to transfer more of its cutting-edge EV technology to China as it prepares to import its state-of-the-art Chevy Volt on a trial basis. (English article) The second deal will see the two Generals, GM and GE, install charging stations in Shanghai on a very limited basis at GM’s China headquarters and in the pilot district of Jiading. (English article) The pair of announcements follow a similar, more interesting one last month, in which GE teamed up with US rental car giant Hertz and Chinese EV maker BYD (HKEx: 1211) in a drive to make EVs available on a rental basis with GE supplying necessary charging infrastructure and BYD supplying cars. (previous post) I applaud China for its steadfast determination push ahead with its EV drive, which it is trying to do by offering buying incentives and by coaxing big names like GE, GM and Hertz to provide the necessary infrastructure. But it’s clear from the reserved nature of all these announcements that the biggest piece of the equation — consumer demand — is still missing. The rental car concept being rolled out by Hertz is good, as it will allow consumers to test out EVs and feel more comfortable with them before making a purchase. Beijing needs to make more moves like this, including a broader public education program, to build up the necessary consumer confidence that even the most aggressive infrastructure-building program can’t provide. Without such confidence, China’s EV drive could sputter and die before it even gets started.

Bottom line: China’s latest EV initiatives involving GE and GM look largely symbolic, and instead Beijing should focus on building the necessary consumer confidence to make its EV program work.

Related postings 相关文章:

◙ Hertz, GE Give Jolt to BYD Electric Cars 赫兹新项目为比亚迪“加油

◙ Beijing Sends Mixed EV Signals 中国应推进电动车基础设施建设和宣传

◙ BYD Toots Electric Horn in Shenzhen 比亚迪在深圳奏响电动汽车号角

Potent Partners Lift SAIC in Wobbly Times 动荡时期 合作夥伴撑起上汽的业绩

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Leading Chinese car maker SAIC Motor (Shanghai: 600104) has just posted its latest results that look quite impressive, underscoring that having strong foreign partners is critical in the highly competitive auto industry as it heads into a major slowdown. SAIC said its profit in the first six months of the year cruised ahead at a rapid 46 percent clip to 8.58 billion yuan, or about $1.3 billion — not bad for a market where growth has slowed dramatically this year and is only expected to reach 5-10 percent following the end of government incentives to boost sales during the global financial crisis. (English article) SAIC’s powerful joint ventures with China’s top two foreign car makers, General Motors (NYSE: GM) and Volkswagen (Frankfurt: VOWG) are clearly a critical part of its continued success, as many of its domestic rivals face a more bleak future with their less-known brands and weaker reputations for quality and after-sales support. Last week former domestic high-flyer BYD (HKEx: 1211), backed by US billionaire investor Warren Buffett, posted a 98 percent plunge in its latest profit (English article), while somewhat stronger domestic rival Geely (HKEx: 165), which made headlines last year with its landmark purchase of Volvo, also posted a modest 17 percent gain in first-half profit. (English article) SAIC should continue to outperform the rest of the market in terms of profit growth for at least the next couple of years, though it too could see its bottom line come under pressure amid growing price wars as companies vie for customers in a cooling market. In the latest development on that front, a GM executive told foreign media that GM’s SAIC-GM-Wuling has recently slashed prices of its low-cost minivans to offset slowing sales, though he added the promotions will be short-lived. (English article) We’ll see.

Bottom line: SAIC’s tie-ups with GM and VW will help it outperform the auto sector during  its latest downturn, but a building price war will also pressure its profits.

中国最大汽车制造商–上海汽车集团股份有限公司(600104.SS)最新财报业绩靓丽，突出在竞争高度激烈、且增长放缓的汽车行业，拥有强大的海外合作夥伴至关重要。上汽业绩报告称，上半年实现归属于上市公司股东的净利润85.76亿元人民币（13亿美元），同比增长46.09%，鉴于今年中国车市增速大幅下滑，这样的业绩已经相当不错了。上汽与中国市场中的两大海外汽车厂商–通用汽车GM.O、大众汽车(VOWG.DE: 行情)建立的合资企业显然是上汽持续成功的一个关键因素。相比之下，国内很多竞争对手因为品牌知名度低、质量声誉一般，售後服务不过硬等，所面临的前景要黯淡很多。上周，国内另一家汽车厂商比亚迪(1211.HK; 002594.SZ)近期利润同比跌幅高达98%，另外一家汽车厂商吉利(0165.HK)中期净利按年不过增长17%。至少在未来数年内，上汽利润表现仍应优于整体市场状况，不过随着中国车市逐步降温，汽车行业价格战渐行渐近，未来上汽利润可能承压。一名通用汽车高管告诉海外媒体，上汽通用五菱近日已经降价销售低价小货车，以提振低迷销量。不过他并指出促销活动不会太长。今後到底如何？我们将拭目以待。

一句话：上汽与通用汽车和大众联合，有助于上汽业绩在最近的车市颓势中鹤立鸡群，但越来越近的价格战也会对其利润造成压力。

Related postings 相关文章:

◙ Geely-Volvo: Good First Year, But Fork in the Road Ahead

◙  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

◙ Ford Comments Signal Accelerating Price Pressure 福特暗示中国车市价格压力加剧

 

Ford Comments Signal Accelerating Price Pressure 福特暗示中国车市价格压力加剧

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The first quiet signs have emerged that a price war is building in China’s chilly auto market, with Ford (NYSE: F) disclosing that it’s coming under pricing pressure as sales slow under economic cooling measures from Beijing. (English article) The comments from Ford’s Asia chief at a recent US event were very low key, only saying the company has seen pricing pressure in the last 3-4 months. He didn’t give any numbers, but I’ve been  in the news business long enough to know that executives don’t usually make this kind of comment unless they want to brace investors for disappointment or worse. After more than a year of blistering growth of 50 percent or more, fueled in large part by incentives from Beijing, China’s auto market has slowed considerably in the last few months to low single-digit growth and even contraction. Unit auto sales were up an anemic 2 percent in July (English article), but that number says nothing about prices, which I suspect are down 5-10 percent from the previous year as many larger cities limit new buying to ease congestion. The pressure is likely to intensify in the coming year, as billions of dollars in spending on new capacity announced during the boom period start to come online. Smart players like General Motors (NYSE: GM) are bracing themselves for the coming China winter by exporting their China models and designs to other emerging markets and by developing new brands aimed at smaller cities where the slowdown won’t be as big. GM officially launched its made-in-China Baojun brand just last week (English article), and said earlier this week it will use made-in-China kits to build a locally developed minivan in India. (English article) But while GM and its China partner, SAIC (Shanghai: 600104) have the resources to make such protective moves, other domestic players like BYD (HKEx: 1211) and Geely (HKEx: 165) look much more vulnerable, and are likely to see their profits drop sharply in the months ahead or even sink into the loss column.

Bottom line: Ford’s recent comments indicate prices are dropping in China’s overheated car market, with the pressure likely to continue for at least the next year.

有初步迹象表明中国汽车市场将打响价格战，汽车巨头福特(F.N)称感受到定价压力，因中国旨在令经济降温的措施导致汽车销售放缓。福特负责亚太业务的负责人此番表态相当平和，只是说过去三四个月中感受到了定价压力。他未提供数据，但我在媒体界多年，深知企业高管很少会作这样的表态，除非他们希望投资者作好悲观准备。去年得益于政府刺激措施，中国汽车市场增速至少50%，而过去几个月则明显速度放缓，甚至到了萎缩的地步。7月汽车销量增长2%，但这根本没有反映出价格因素，我推测汽车价格同比下降了5-10%，因为许多大城市出台限购令，以解决道路拥堵。未来一年车市价格压力可能加深，因厂商扩充产能的投资将到位。象通用汽车(GM.N)这样精明的厂商已经相应作了调整，将在中国生产车型和设计向其他新兴市场推广，并面向小城市开发新的品牌，因为这些城市的汽车销售放缓程度没那麽严重。通用上周刚刚正式推出“中国制造”的品牌“宝骏”，且本周稍早称，将对在中国设计的小型货车进行改造，在印度生产和销售。虽然通用与上汽(600104.SS: 行情)有足够资源采取这类自我保护性举措，但其他国内汽车厂商，譬如比亚迪(1211.HK)和吉利(0175.HK)则更容易受到冲击，未来数月利润可能大幅下降，甚至可能出现亏损。

一句话：福特近期言论意味着，中国汽车售价将呈下滑，这样的压力可能至少在未来一年中将持续。

Related postings 相关文章:

◙ 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’s Car Rebound: Price War Looming? 中国车市反弹：价格战越来越近？

◙ BYD: Running on Empty? 比亚迪：累了？