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 →
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.
I’ve written in the past about the biggest impact on J3 earnings, not natural disasters or imagined acceleration…the yen. With the yen trending stronger against the dollar over the past week, I took a look at estimates for FY2013 to double. With Toyota and Honda using 80 yen/dollar and Nissan 82 yen/dollar, I’ve talked with some folks who are concerned that we may see some disappointment in the coming quarters if the yen hangs around these 78 levels. I’m not so worried. Let’s look at three points. Continue reading →