Tag Archives: cars

China’s Car Makers Seen Surpassing Europe’s Volumes In 2013

China is set to surpass Europe in car making this year, speeding past another milestone in the rise of the country’s auto industry. The forecast comes from the Financial Times which commissioned five market research companies to project 2013 production numbers. Their consensus estimate is that China will make 19.6 million cars against Europe’s 18.3 million. The U.S and Japan, the next two largest car manufacturers produce 8 million-9 million vehicles a year.

The numbers represent a 10% increase in China’s production and a slight fall in Europe’s. China’s production growth is expected to easily outstrip that for the $1.3 trillion (sales) global industry as a whole of 2.2%, itself slower than 2012’s 4.9% growth.  Since 2000 car production in China has grown ten fold, on the back of strongly growing and government-supported domestic market, now the world’s largest. China’s carmakers then made barely one in every 27 cars manufactured worldwide. This year, on the basis of these forecasts, they will make better than one in five.

Their next challenge is to move up the product line value chain and establish international auto brands. There is no Chinese manufacturer in the top 15 of the world’s car makers ranked by global production volume, though China’s top three, Dongfeng Motor, Geely and Beijing Automotive would make the top 20.  There is one other big challenge, too, to make a decent profit from it all.

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Buffett’s Ups and Downs With BYD

As a snapshot of global financial markets’ ups and downs, look no further than U.S. billionaire investor, Warren Buffett. In 2008, he paid $231 million for a 10% stake in BYD Co., China’s largest maker of rechargeable batteries and whose chairman, Wang Chuanfu, nurtured a dream of making electric cars. BYD’s F3 sedan was China’s best-selling marque in 2009 and 2010, but its hybrid F3DM and e6 electric model have not met with similar success and the company has had to delay the U.S. launch of the e6 until 2012. The company’s share price fell by 14% on Tuesday in the wake of a third-quarter profits warning. The value of Buffett’s stake is now down by $2 billion from its peak in October 2009, though still double what he paid for it.

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This Bystander has always been a sucker for those little numerical nuggets that provide a telling economic snapshot. We found just such a one  in the interim financial report of Sparkle Roll, the Hong Kong-listed ultraluxe marketer that runs a tony car dealership in Beijing. It covers the six months ended 30th September 2010:

During this six month period, number of automobiles sold in terms of different brands was 123 Bentley, 43 Lamborghini and 95 Rolls-Royce compared to 70 Bentley, 14 Lamborghini and 11 Rolls-Royce respectively [in] corresponding period of 2009. Revenue of automobile sales amounted to HK$1,155 million ($149 million) compared to HK$380 million of same period last year.

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Fixing Beijing’s Traffic: Tough Medicine Time

No city has built its way out of traffic congestion. New roads mostly attract more traffic. Beijing, caught between the double squeeze of rising household incomes and falling car prices, is no exception. Municipal authorities are now proposing reducing the number of official journeys by car, imposing a congestion fee on drivers, raising parking charges and introducing odd-even license plate restrictions in the city center. Car owners, predictably, approve of the first proposal but not the other three, Xinhua reports.

Liu Zhi, who leads the infrastructure team at the World Bank’s Beijing Office, argues that far more intensive demand side measures are needed, from non-pricing controls on vehicle ownership and use to pricing controls such as fuel taxes and congestion pricing. Indeed, Liu points out, the Bank suggested more than a decade and a half ago (when there were fewer than 1 million cars in Beijing)  that the municipal government introduce such measures to choke off congestion before it started, “but a city heading toward hyper congestion is often like a patient not wanting to take the tough dose of medicine until the illness becomes too serious”. There are now 4.7 million cars in the city, with 760,000 added this year, according to the Beijing Traffic Management Bureau.

Liu points to Seoul, which reached the point of congestion in the mid-1990s that Beijing now faces. It has taken it 15 year of increasingly tough and not always popular demand-side measures from gas taxes to public-transport investment such as subways, bus lanes and cycle ways to ease, if not eliminate the congestion in the South Korean capital.

It is time to administer the tough dose of medicine in Beijing, Liu says.

The non-pricing and pricing controls of vehicle ownership and use in congested cities are just the means to correct the long-standing policy distortions, and create the right incentive for car users to shift to other modes of transport. It is time for Beijing’s car-owning group to understand this. It is time for Beijing to adopt demand-side controls.

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Shanghai Automotive Embraces General Motors

What’s good for GM is good for…China. The old saw needs amending following not just November when GM sold more cars in China than it did in its alleged home market but also since GM is to hand over majority control of its thriving Chinese car business to its partner Shanghai Automotive (SAIC) as the pair launch a new joint venture to crack the Indian market for small cars and micro commercial vehicles now dominated by the Japanese. The two already have a JV in South Korea.

While the switch in control of the Chinese JV, Shanghai GM, is being presented as an accounting move to let SAIC consolidate the JV’s earnings (it will buy a 1% stake in the jv for $85 million to give it a 51% stake), China’s carmakers seem to be picking Detroit apart piece by piece. Beijing Automotive Industry is considering bidding outright for GM’s Saab unit, now the Koenigsegg consortium bid, of which it was a part, has collapsed. Bank of China is reported to have set up a $3 billion line of credit for BAIC to finance a possible bid. GM’s Hummer division is being bought by Sichuan Tengzhong. Privately-owned Geely is reported to have lined up the financing for a bid for Ford’s Volvo car business.

The SAIC move is interesting because it is not just buying its way into foreign markets through acquiring distressed assets, but taking GM along with it to teach it the ropes. And nor does it have its eyes on the slow-growing developed markets but the rich promise of emerging ones.

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The Sun That Rises On Shanghai Sets On Tokyo

Attendance at the Tokyo Motor Show used to be mandatory for the world’s carmakers. At this year’s show, which opens later this week, there will be only three, all niche European manufacturers. The only leading car makers among the 108 exhibitors are Japanese firms like Toyota and Honda. The 45-year old Tokyo show has been eclipsed by Shanghai’s as Asia premier auto show. April’s show in Shanghai attracted 1,500 exhibitors from 25 countries, reflecting China’s emergence as the world’s largest car market.

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Filed under China-Japan, Industry

Toyota Car Recall A Big Embarrassment

Oops. Toyota is recalling 690,000 cars made at two of its joint ventures, Guangzhou Auto and Tianjin FAW because of faulty electrical window switches.  That is more cars than it sold in China last year. Though not a safety threatening defect, the recall is big, and an embarrassment. Not only is it the biggest autos recall in China since 2004, it also highlights Toyota quality/reliability/durability standards and follows a recall of Camry’s earlier this year because of faulty brakes. Models affected by this latest recall include Camry, Corolla, Vios and Yaris.

The recall won’t do much for Toyota’s idling sales in China, either; the Japanese carmaker hasn’t matched the recent success of America’s GM among the foreign manufacturers, largely because it has a limited range of compacts, and so hasn’t been able to capitalize as much on government tax incentives for small cars.

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Filed under Economy, Industry, Product Safety

Traffic Restrictions Reimposed In Beijing

Olympic-style traffic restrictions are back in Beijing. This time each car will have to spend one day a week off the roads, as opposed to every other day as during the Games. On Monday, cars whose registration number ended in a 1 or 6 were grounded. Tuesday will see 2s and 7s off the roads, and so on. The new rules are expected to take 800,000 cars a day off the roads, with a promise that half the capital’s cars will be banned on days of exceptionally heavy pollution, the BBC reports.

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Car Talk

This Bystander is amused by the news that Beijing is exhorting government officials to abstain from using four-wheel drive vehicles and other gas-guzzling cars, and to take more public transport in order to lower emissions and protect the environment.

Not because that is not a worthy aim; China has pledged to cut emissions and energy consumption, concerned that rapid industrialization is placing an unbearable strain on the environment, a strain that could become the focus of organized opposition to the government. Officials are being asked to do their part by cutting car use by 20% by the end of 2008.

But because of the unusual skirt-lifting on Chinese officialdom contained in the Xinhua report of the announcement. Official vehicles are not to be used in private business or leased for commercial purposes, the announcement says. It also reminds officials that using seniority to gain the use of government cars owned by lower-level departments, or accepting vehicle donations from private enterprises, are both strictly banned.

Using government cars for private purposes is rampant as is the increasing use of ever more luxurious cars in official circles. China’s low-emission vehicles tend to be bottom of the range. We’ll see how much trading down has been done by the end of next year. We suspect not much.

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Filed under Environment, Politics & Society