For more than two years, TTAC’s been calling attention to the fallacy of GM’s claims that foreign ops will save the company from bankruptcy. Last week The Wall Street Journal highlighted a fact that caught our eye many moons ago: GM’s much-ballyhooed sales increases in China are relatively unimpressive. “In the first six months of the year, sales growth of GM brands in China lagged far behind the overall sales increase for passenger vehicles… Shanghai GM remains the largest single passenger-car maker in China, but its market share slipped to 8.9% in the first half of 2007, from 10% in the first six months of 2006. The decline has come amid an escalating price war as car makers scramble to entice buyers.” The problem? Same old shit: muddled branding, a rep for poor quality, over-production. The solution? Scary. “General Motors Corp.’s biggest China manufacturing joint venture said it would offer interest-free car loans, as the company maneuvers for advantage in the increasingly competitive China market and tries to encourage people in this cash-centered economy to borrow to buy cars.” Meanwhile, you know the Chinese market is hurting when the world’s largest automaker is cutting back. “The carmaker will reduce output of passenger cars by about 10 percent at its factory in Guangdong province,” Bloomberg reports. “Toyota will slow the pace of production for at least a few months… China’s passenger car sales fell 6.2 percent in August, the first decline in more than three years, as the Beijing Olympics and a slumping stock market prompted drivers to delay purchases”
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Chinese stock market down 50% and the real estate in the dumper. Somebody must have a crystal ball.
The overextended US hyper-consumer suddenly can’t afford to keep playing the game. Part of the reason? So darn many US consumers have been kicked out the back door of their former employers that there simply isn’t the income going around. Falling median incomes, rising unemployment, rising food and energy costs all come home to roost.
Those who still have jobs are well advised to be more careful with their cash, and just about nobody is taking out home equity lines of credit.
China can recover by simply boosting demand in their home market (perhaps by handing out more cash at home), but they will also give further advantages to their home team suppliers and continue to put the hurt on the foreigners. China makes no bones about putting it’s economic needs above those of it’s trading partners. Duh.
Facing booming oil prices the Chinese government was forced to cut down on subsidies for fuel. So Chinese car sales have plummeted for the same reason as everywhere else: cars have become more expensive to run.
Interestingly though the Chinese market for electric scooters is booming at over 10 million per year from over 450 manufacturers. Not because any Chinese gives a hood about the environment but because they are cheaper to buy and to run than petrol models. And here lies the cure for the Chinese car market too. Mass produced cheap electric cars which cost only a few cents per mile to run.
Anyway, let’s face it: if car penetration reached western levels in China tomorrow, oil would run out by Thursday next week.
However this concept is unlikely to appeal to GM though since they consider the concept of a car without ICE as the ultimate automotive blasphemy. That’s why they designed their Volt as an ICE car with an extra electronic accessory.
Last I heard, foreign car companies are required to partner with Chinese companies in order to do business in China. This makes it even easier for Chinese companies to “borrow” first-world-nation techniques and designs. At some point the Chinese companies will break out on their own and start producing those same cars on their own while keeping all the profit. Toyota and GM are screwed no matter what; it’s just a matter of making some short-term profits there while giving up all company secrets a little bit faster.
Dutchchris: “However this concept is unlikely to appeal to GM though since they consider the concept of a car without ICE as the ultimate automotive blasphemy. That’s why they designed their Volt as an ICE car with an extra electronic accessory.”
Heh heh, total agreement here.
I suppose that’s because GM would have trouble changing their name to General Electric Motors
So pull out the old crystal ball and call the next burgeoning market already!!
Inquiring minds….
And why hasn’t anyone mentioned that the largest manufacturer of diesel ELECTRIC locomotives was/is Electromotive? Owned by General Motors.
So ICE/electric is no news.
Neither is straight electric. Easy-Go comes to mind.
Maybe that would take the wind out of alot of people.
Last I heard, foreign car companies are required to partner with Chinese companies in order to do business in China. This makes it even easier for Chinese companies to “borrow” first-world-nation techniques and designs. At some point the Chinese companies will break out on their own and start producing those same cars on their own while keeping all the profit. Toyota and GM are screwed no matter what; it’s just a matter of making some short-term profits there while giving up all company secrets a little bit faster.
Let the Chinese have GM secrets. Who cares? It’s not like they’re getting the best of the best or anything