Will PSA be here as a company in 5 years. Sure it will, as a brand, company and equity. But in what way shape or form seems to shift each day. Six months ago the market was pretty hedged on that question, a couple of weeks ago they seemed to have a plan. After Philippe Varin’s comments this week on “alliances” fear is creeping back. So, is there an existential threat to PSA at least as an invest-able vehicle?
Passenger vehicle (PV)sales in China were up 7.1% in 2012. If anyone thought the market would continue with double-digit growth they are 1) disappointed and 2) delusional. In Tier 1 and 2 cities, the market is pretty much mature now. As Tier 3 and 4 cities join the auto race, the overall PV market will continue to grow. But high double-digit growth cannot be extrapolated ad infinitum and growth is not perfectly linear.
Look at chart 1 and you see that if we get only a 4% — very conservative – CAGR through the end of the decade we’ll see a market bigger than 20 million units. China is firmly the biggest global auto market. And remember from my past reports, global brands have at least half of this market.
From a performance perspective, this modest assumption shows that we will have Continue reading →
The “China Slowdown” is running right behind the Europe morass and the U.S. fiscal cliff have been the big news for the US market. Now, August sees the China auto market rate of growth slow again, growing concern for automakers. Here are a couple of thoughts on the impact on global Auto OEMs:
The biggest concern I’ve heard is over Toyota’s two months of decline in the market; -15% for August after a -5% in July. Toyota says this is more a technical issue resulting form unseasonably big increased in July and August 2011 as it ramped local sales back up after the Japan crises. Both Toyota and local dealers dismissed suggestions that local pushback on Japan-China politics was not Continue reading →
While everyone is laser focused on the imploding European auto industry and we ponder the sustainability of the US volume recovery, there are a few things to keep an eye on that may not be top-of-mind:
1) Latin America: The meteoric growth of the Brazilian market has slowed to standstill and surrounding markets have stalled as well. While the industry has expected the flattening market, a steep rise in low-cost imports has created pricing pressure. Companies like Fiat, GM and VW who had been enjoying the tailwinds of strong double-digit margins over the past decade will feel Continue reading →
China auto sales are in for the first half and they are slightly ahead of the consensus of 5% growth for the year. Overall PV sales are up 7.1% over last year, and again we see a two-tiered level of performance.
First-half growth was driven largely by a rebound on the Japanese brands after their hit from last year’s earthquake impact, and a push from luxury brands 2012 actions to move overbuilt inventory. Overall GM + the Japanese brands lead the increase while locals were relatively flat. June sales were extremely strong +16%, I see this as mainly driven against the constricted J3 sales post earthquake in 2011.
The Japanese brands drove market growth with newly stocked inventory. June sales were extremely strong for Honda in particular, up 84%. Nissan and Toyota had more regular supply last year leading to results more in line with YTD numbers.
Finally, Sergio Marchionne has pulled the trigger on fully merging CNH and Fiat Industrial, and pretty much in line with expectations. The proposal made to the BOD at CNH (which Marchionne is Chairman of) from FI (which Marchionne is chairman of) is for a merger of the two companies at “undisturbed” pricing” answer the only real question for investors: Is there any downside for CNH shareholders? It turns out not really.
The inverse question was more important: Is there any upside? Not really here either, and that may be a disappointment for some investors who speculated Continue reading →
When I saw that China Q1 2012 auto sales were down 1.2%, I wondered was this the “soft landing” or just the beginning. After growing 32% in 2010, the market slowed to a “modest” 5.4% uptick for 2011, Q1 may be disheartening; however, March sales were “up a tad.” Well, I had the chance last week to spend some time last week with executives from the Chinese auto retail sector and looked a little deeper with a front-line perspective.
Following some takeaways from my listening:
The PV market is and has been bifurcated. The 2010 incentives to spur growth of local brands accelerated the spread versus global brands. This explains why Continue reading →