Shocked by growth rates below the usual double digits, Chinese automakers are postponing plans for new car launches. China’s National Business Daily reports that Great Wall Motor has put off the rollout date for its Coolbear sedan to ’09. (The Coolbear made headlines for being a more or less exact copy of Toyota’s Scion xB.) FAW’s own luxury brand Besturn has moved the launch of its long awaited A-class car B50 to the beginning of next year. Besturn hasn’t done much yet, except become the target of caustic remarks. “Separate the two words,” says China Car Times, “and you get Best Urn – not the worlds most confidence inspiring name for an auto.” Hyundai’s NF and Ford’s new Fiesta will also be postponed. More delayed launches are being expected from China’s 60-odd car brands. Analysts fear that the lack of new models will put an even bigger dent into the already sluggish sales. Rao Da, Secretary General of China Passenger Car Association, estimates the year-on-year growth for Chinese auto sales may slow to five percent in 2008. J.D. Power disagrees. They reckon it will be 9.7 percent. Whoever is right, 2008 growth rates in China will be a far cry from the 24.1 percentage growth achieved in 2007.
Category: China
It’s an open secret in Chinese industry circles: within the next six to eight years, the domestic auto industry wants to stand on its own technological feet, instead of relying on U.S., European and Japanese joint venture partners. At after-work hangouts, such as “Schindler’s Anlegestelle” around the corner from Volkswagen Group China’s headquarters in Beijing’s bar and embassy district Sanlitun, fare-well parties for managers heading home are already decreasing. In the name of the almighty efficiency, most foreigners have already been replaced by supposedly cheaper Chinese. And now, no more pussy-footing around. According to Gasgoo.com, which read it in the Beijing News, which cited a faceless industry analyst, Chinese industry giant FAW is “focusing its human, financial and material resources on making cars of its independent brands.” The joint venture partner of Volkswagen, Mazda, and Toyota “aims to sell two million vehicles by 2010, and half of them must be FAW’s own-brand vehicles.”
China’s official news agency Xinhua reports that General Motors has kicked-off their “2009 promotional tour” of China for their Chevrolet Equinox hydrogen fuel cell car. Starting in China’s capital Beijing, GM will send the Equinox across the world’s fourth largest country to drum-up interest for the mid-size crossover SUV that uses the same alt propl as the elusive Chevrolet Sequel. China is no stranger to the technology. Researchers at the Anting Automotive College of Shanghai’s Tongji University developed China’s first working fuel cell car– based on a venerable Santana 2000– in 2003. GM claims that they will introduce several Chevrolet Equinox hydrogen-fuel cell cars to China in the next two years. (NB: that’s “cars” not “models.”) Nobody knows what this alleged car or cars will cost, or where GM may place the necessary hydrogen refuelling stations within the vast reaches of the middle kingdom. (No small point that; the Chevy Equinox needs a fill-up every 200 miles. Or less.) For the foreseeable future, in China at least, GM’s zero emission car of the future will continue to be what comes out of its exhaust pipe: vapor.
In the wake of the milk worries, affluent Chinese parents of babies more and more turn to ‘milk mothers’ or ‘Nai Ma’ who breast feed their new-borns if the real mother doesn’t want or can. Baby formula? No, thank you. (Or “bu, xie, xie,” as they say.) They want the real thing for their one child only. In Beijing, a milk mother from the provinces can make between $300 and $1600 a month, with free room and board. A secretary in Beijing starts at around $300 a month, and must use the money to pay for food and shelter. A family that barely can feed their babies is unlikely to worry about a new ride. A Chinese milk mother can buy a new car for cash with three or five months earnings. While the International Breastfeeding Committee of WHO/Unicef recommends breastfeeding for six months, Chinese hospitals recommend a year or more. After a year’s of not really hard work, the milk mother can afford two or three cars. Meanwhile, back in the U.S. of A. , parents need parts to keep their cars running, at least twice a month, for a trip to Wal-Mart.
Bloomberg reports that Toyota has sold more cars in China than GM over the first nine months of this year. Sales at GM’s biggest Chinese venture, Shanghai GM, have been down two years in a row, while Toyota sales have grown at about triple the market average since opening a new Chinese Corolla plant last year. GM has long been the number two automaker in China, trailing only China pioneer VW/Audi for over a decade. (Quite an accomplishment when you consider war-born Chinese antipathy to all things Japanese.) The General’s ouster from the second highest sales spot couldn’t come at a worse time for GM. “China is very important to GM and losing share there makes life even more difficult,” said Daiwa Associate Holdings analyst Ricon Xia. “Japanese automakers know how to make cars for Chinese consumers and they have been expanding in China at a very steady pace.” Needless to say, passing GM in China means Toyota is that much closer to finishing the year as the top-selling automaker in the world, replacing GM after decades of dominance. With growth in the Chinese market slowing, GM will also have fewer opportunities to regain ground on Toyota, who opens yet another giant factory in Guangzhou province next year.
While Buick has helped GM become one of the top-selling firms in China, Chrysler is struggling to sell its own brand of Americana in the Middle Kingdom. Automotive News [sub] paints a dreary picture of Chrysler’s China operations, describing dealerships in glamorous Shanghai with “a sun-faded advertisement for the 300C peeling off the glass,” and a “rain-streaked shop sign above the main entrance (on which) the colors inside the Chrysler logo have washed out completely.” And between quotes from dealers bemoaning “not so good” recent sales numbers and the lack of Chinese production, AN finds plenty of blame to go around. Though Chrysler had an early inside line on the Chinese market thanks to its Beijing Jeep venture in the early 80s, the Daimler hookup proved disastrous to ChryCo’s Chinese ambitions. “Under DaimlerChrysler, Chrysler was only ever seen as the U.S. unit of a global company,” a Chrysler employee tells AN. “When it came to expansion into China, Chrysler’s needs took a back seat.” As a result, Chryslser sold only 8,207 300Cs, Sebrings and Caravans in China in the first six months of this year. Over the same period, General Motors China sold 261,443 cars and Ford Motor China sold 89,117.
No surprise there. But it’s nice to see someone else noticing that GM’s repatriating profits from foreign ops to keep the corporate mothership alive. [Note to GM’s BOD: we’d love to see some hard numbers on that.] That someone is Bertel Schmitt. I’m not sure where Berty gets his info, but the CEO Sinamotive Group (HK) Limited writes, “Bob Lutz, GM’s vice-chairman, said GM is making plans to move money from Chinese operations to the U.S. in order to compensate for North American losses. Since nobody seems to want to buy the Hummer brand, which GM put up for sale, repatriating profits from China is one of the few options left for GM. Draining the huge, vibrant and growing China market of funds while the rest of the world tanks doesn’t sound like such a good idea, but these are desperate times. ‘We do not rule out such a possibility under current conditions,’ Lutz said. (Translation: We are already preparing the transfer.) The withdrawal will not sit well with GM’s joint venture partners. When cash is king and credit is an endangered species, cashing in will be extremely unpopular.” Oh, did we mention that Chinese auto sales have stalled, and GM’s share of same has diminished? Seems churlish, but there you go.
Battery maker and hybrid powertrain dark horse BYD got quite a legitimacy boost when the Oracle of Omaha (and possible Obama cabinet member) Warren Buffett dropped $230m on ten percent of its stock. And that boost seems to be translating into accelerated plans to bring BYD cars to market. China Car Times reports that BYD will begin selling its “dual mode” (not to be confused with GM’s disasterous “two-mode”) hybrids (specifically, the Toyota Corolla F3DM compact) before the end of the year, several months before the previously-publicized release date. No plans have been announced to accelerate European sales, set to begin in 2010. And U.S. sales are still a gleam in Warren Buffett’s shrewd eye. BYD hybrids have been extensively tested in China, and the firm claims that its proprietary batteries are good for 62 mile of plug-in charge and will last over 300k miles before needing to be replaced. The parallel/serial hybrids can be charged to 50 percent of capacity in ten minutes, while a 100 percent charge takes seven hours, according to BYD. If these numbers hold up and quality is up to snuff, BYD could soon be a big name in the hybrid game. After all, Ma Buffett didn’t raise any fools.
Automotive News [sub] reports that GM is beginning its promised cutback in contract workers. “We are in the process of advising several temporary agencies that we are continuing to eliminate some contract jobs,” GM spokesman Dan Flores told Automotive News. He declined to say how many workers or the GM sites that are affected.” TTAC can fill in at least one of the blanks. A reader informs us that there are around 500 contract designers on staff at GM’s Warren, MI Tech Center. Approximately four-hundred got the axe. Friday is their last day. He also tells us that the remaining 100 workers will be gone by year’s end. Where does this leave GM’s hybrid design team? China. [thanks to you-know-who-you-are]
China’s Build Your Dreams (BYD) is something of a dark horse in the hybrid/EV game. BYD has leveraged its status as a major manufacturer of NiCad and Li-Ion batteries to create what it calls a unique hybrid drivetrain, shown in a number of derivative concept vehicles, The system purports to offer a Prius-like parallel hybrid mode, a Volt-like serial hybrid mode AND an EV-only mode. Without independent verification, the firm has invited accusations of vapor-mongering. Automotive News [sub] reports that the thinking man’s billionaire Warren Buffet has cast aside such concerns and dropped $230m on a ten percent stake in BYD. “(BYD founder) Mr. Wang Chuanfu has an extraordinary managerial record, and we welcome the opportunity to work with him,” said Buffett in a statement announcing the purchase by MidAmerican Energy Holdings, a unit of his Berkshire Hathaway financial juggernaut. This development gives BYD exactly what it needs: legitimacy. Buffett is well known for investing purely on a firms business fundamentals; his vote of confidence lifts BYD from unknown quantity to potential, yes that word again, game-changer. Meanwhile my home town of Portland, Oregon has been reaching out to BYD in hopes of landing a local production deal. Hope rain doesn’t short-out these things…
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”
GM’s burning its way through a reported $1b per month. So shelling-out $250m on a new research and development campus in Shanghai is no biggie. And here’s some PC for your PC: a significant part of the new research facility will focus on developing new green and alternative energy technology (whatever green means). When fully operational in 2009, the new facility will employ some 2500 people. And for those of you inclined to say “yeah right,” General Motors’ Asia Pacific President Nick Reilly says any problems in the Chinese market are all in your head. “Reilly attributed the downturn in the auto market to the Beijing Olympics in August, a sharply declining Chinese stock market, and an increase in fuel prices in June,” the GM suit told CNN Money. “But he added that ‘underlying demand is still there.’ Reilly said he expects vehicle sales to return to double-digit growth this month or next. He said he expects China’s auto market to maintain 10% to 15% growth after this year, without elaborating.” Elaboration? We don’t need no stinkin’ elaboration!
Because China’s five, huge showrooms just weren’t meeting the market’s demands, Rolls Royce has opened its sixth showroom in The People’s Republic. The new 4300 square foot palace resides in the relatively well-off region of Hangzhou, and should be large enough to shelter Rolls’ expansive, cough, lineup: the Phantom, long-wheelbase Phantom, Phantom Drophead Coupe and Phantom Coupe. In 2007, Rolls sold 1010 land yachts globally; 70 of which were in China, where they are are now impressing a populace that could no more afford an Anglo-German uber-sedan than you can pay off the U.S. debt with your Capitol One card. That said, there are over 6000 people in China worth more than $30m. Of course, there is something of a history of limos for the Chinese elite, where some members of the Cultural Revolution were more equal than others. Same as it ever was? Same as it ever was.
MG first introduced its mid-engine F (later TF) roadster way back in 1995, but new owners Nanjing (SAIC) are still trying to sell the damn thing. Production of 500 TFs for the British market began this month at the Longbridge plant, in a run-up to restarting regular production. And until recently the Chinese firm was planning on opening an R&D facility and factory in Ardmore, OK with an eye towards selling the outdated runabout in the US. But no longer, reports Automotive News (sub). "The U.S.A. isn't on the short-term radar as an anticipated market for us, but with the right product, it would be good to return there," says Nanjing flack Gary Hagen. Considering the TF hasn't been a competitive product for nearly a decade, yeah, it's safe to assume it might help to jump into the US market with a better best foot forward. After all, the TF's British comeback is gamble enough, despite a number of sales upsides. First, it's still nominally a British sports car, and Nanjing can rely on patriotism to move at least a few models in Old Blighty. Besides, Brits go for underpowered and out-of-date sports cars as long as they're sufficiently charming, as witnessed by the eternal availability of Fiat's Barchetta. The US offers far fewer sympathy-buy opportunities and much higher dealer and advertising costs. Whether Nanjing ever decides to build an all-new MG to make good on its North American ambitions is very much up in the air. At least they haven't already re-killed the brand stateside before even trying.
You'd think "just-in-time" production techniques wouldn't extend to, say, Korea (Aveo) or China (Equinox engine). But you'd be wrong. And The National Association of Automakers view new anti-terrorism legislation– that's been six years in the making— as a threat to their business. "The U.S. Customs and Border Protection Bureau wants shippers to collect 10 new categories of data for U.S.-bound cargo 24 hours before it's loaded on ships in foreign countries," The Detroit News reports. "As well as to provide data about the physical location of cargo aboard a U.S.-bound vessel and status messages that report container movements… Automakers say the rule could upset the delicate 'just in time' shipping of parts to arrive at auto factories as they are needed for vehicle production, which saves the companies the cost of stockpiling parts… The automakers argue the rules would do little to make the country safer." And might be extended to Canada and Mexico. "Automakers argue in their letter that 'there is a better way,' saying that CBP [Customs and Border Protection] should focus 'on importers, exporters and countries that pose a risk.'" Isn't that exactly what they're trying to do?
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