China 2013 Auto Sales: take the long term positive view

jcPassenger 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.

china outlook

From a performance perspective, this modest assumption shows that we will have Continue reading

Advertisements

China August Auto Sales view; relax

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 first half auto sales: still on two tracks

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.

However, all international brands are not the same Continue reading

Used cars in China: risks but VER¥ BIG opportunities

No, I don’t speak the language, but I do recognize that the development of the used cars (Èrshǒu chē) market marks a milestone in the maturity of the Chinese auto sector. In 2011. China passed the US as the largest new car market with 14.5 million passenger vehicle sales and from 2007-2011 the market saw more than 50 million new cars sold.

Going forward, the market may slow, but will remain at least in the 20 million range with foreign brands growing faster and more consistently than the overall market. During the first quarter of 2012, domestic brands fell 8.1% while foreign brands picked up 3.2 pts of market share, now accounting for 42.9% of total sales.

This trend could push the development of a local used car market as international brands work to import their experience in managing used car markets in the US, Japan and European markets. Among other pressures on the demand side are tightening emissions restrictions. Wholesale buyers are avoiding older, low-end units in favor or more recent mid-to-high-end and luxury cars. While there is currently a net oversupply of used vehicles in Beijing, luxury models such a used Mercedes have seen double-digit growth in China.

The steady growth has built a considerable park of existing vehicles in China. While there is no solidly reliable data on how long a first buyer (and more than two-thirds of buyers today are first time buyers) hold onto a car, we are seeing a burgeoning used car market. In 2009, the state had already begun efforts to reform the used market including standards for city and regional used car exchanges. Today, market participants are waiting for additional reforms to establish a uniform system on pricing, terms of sales as well as  protection and guarantees for consumers. These reforms should bolster the opportunity for dealers, supporting higher prices that would allow buyers to feel more confident in paying for the pricier non domestic used cars.

This foreshadows a tremendous opportunity and risk for foreign brands in China. If they can corral the used car market, Continue reading

J3 Automaker profits on track for FY 2013: probably so!

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