Business

Luxury sedan makers are suffering from shrinking sales in the West, but in China, sales continued to be robust in June and during the first half of the year.

German luxury car brands, Mercedes, Audi and BMW, posted strong sales during the period in China even though their premium offerings could not benefit from the government’s industry stimulus measures, which are basically aimed at smaller cars.

Their diversified product strategies, which offered more models for Chinese consumers, have also proven to be quite successful.

Mercedes-Benz, which led growth in the luxury segment on the Chinese mainland, continued to show impressive numbers in June, delivering more than 5,100 vehicles, a year-on-year increase of 52 percent.

It concluded the first half by delivering nearly 27,000 vehicles, a record year-on-year growth of 50 percent.

“Our success in the first half of the year was driven by a combination of factors, including China’s encouraging macroeconomic environment, our comprehensive product strategy and the approach to achieve highest customer satisfaction,” said Bjoern Hauber, general manager of sales and marketing at Mercedes-Benz China Ltd.

Volkswagen’s premium brand Audi said its sales in China, its biggest overseas market, increased by 11 percent from a year earlier to a record 66,866 vehicles in the first half of this year, with June sales rising 28 percent to 13,265 units, also an all-time high for that month.

The German luxury car brand retained an average growth rate of more than 20 percent over the previous month in the first half, maintaining more than 40 percent market share in China’s luxury vehicles segment.

“The robust sales show that we have devised the right product strategy for the Chinese market, which is matched to the tastes of the Chinese consumers,” said Zhang Xiaojun, deputy managing director of Audi China’s sales division.

According to Zhang, the sales were driven by a 26 percent growth in deliveries of Audi A4L, which featured a longer wheelbase tailored for the Chinese market, based on Audi’s popular mid-size saloon car.

The world’s biggest premium carmaker, BMW AG, said its sales in China surged by 44 percent over last year in June, to 8,506 units, while its global sales fell 12.7 percent.

In the first half, BMW delivered 37,627 luxury cars in total in China, up 24 percent year-on-year. The growing demand for the BMW X5 and X6 SUV models fueled the sales increase, the company said.

“Almost all luxury passenger carmakers realize the importance of product diversification. More luxury cars with smaller displacement and less fuel consumption have been introduced into the China market, including our B-Class, GLK-Class and Smart,” said Mercedes’ Hauber.

“All the luxury sedan producers, including Audi, have reinforced their product lineup in the China market, especially with products catering to Chinese consumers,” said Zhang of Audi.

(China Daily July 10, 2009)

Sales of China’s domestically made automobiles topped 1.14 million units in June, up 36.48 percent over the figure a year earlier, the fourth month in a row surpassing the 1.1 million units mark, the China Association of Automobile Manufacturers (CAAM) said Thursday.

Sales of China’s domestically manufactured vehicles stood at 6.099 million units in the first half of this year, up 17.69 percent over the figure a year earlier, according to the CAAM, adding that both the auto sale and production figures in the first six months had set a half-year record high.

China produced 5.99 million automobiles in the January-June period, up 15.22 percent year on year.

The association attributed the increases to a series of government stimulus measures to boost domestic consumption.

China in January halved the purchase tax on passenger cars to 5 percent for models with engine displacements of less than 1.6 liters, a move to shore up the domestic auto consumption.

The CAAM figures showed that passenger vehicle sales volume rose 25.62 percent year on year from January to June to 4.53 million units, and the passenger vehicle production volume increased 20.96 percent year on year to 4.42 million units in the first six months.

The association said it was “cautiously optimistic” about the auto sales on the domestic market in the second half of this year, predicting that China was expected to sell more than 11 million vehicles in 2009, higher than earlier prediction of 10.2 million vehicles.

Zhu Yiping, CAAM’s assistant secretary general, said that China’s industrialization and urbanization continued acceleration despite the adverse effects of the economic slowdown.

“The government’s restructuring and stimulus plans for the automobile industry had also greatly promoted the development of the industry,” Zhu said.

China unveiled a 4-trillion-yuan (585 billion U.S. dollars) stimulus package last November and 10 specific industry stimulus plans for autos, iron and steel, petrochemicals and other sectors this year to shore up the Chinese economy.

Chinese auto makers reported a 6.7-percent sales rise year on year of 9.38 million units in 2008.

(Xinhua News Agency July 9, 2009)

By CT Johnson

Chinese automakers made two bold overseas moves this week, with Beijing Automotive Industry Holding Co. bidding for GM’s Opel and Vauxhall divisions and Guangzhou Automobile Group signing a joint venture agreement with Italy’s Fiat. Both deals show the growing clout of Chinese companies in the international market.

According to sources at GM, on July 4, Beijing Auto submitted a non-binding proposal worth a reported €650 million for German-based Opel and U.K.’s Vauxhall. GM is already negotiating the sale of its two major European brands with a consortium led by Russia’s Sberbank and Canadian auto-parts manufacturer Magna International.

The announcement places pressure on the Russian-Canadian group, which was chosen by the German government as the preferred purchaser of Opel earlier in the year. However, talks between the consortium and GM recently slowed when disputes arose over the rights to use GM technology and engineering designs.

Frankfurter Allegemeine Zeitung reported that GM is only considering the Beijing Auto deal as a back-up to an agreement with Sberbank and Magna. GM was apparently reluctant to accept any bid at all from the Chinese automaker because of concerns that such a deal would create further competition for GM in China.

Beijing Auto’s offer is for a 51 percent stake in the German and British carmakers, with GM holding the remaining 49 percent. This structure is somewhat simpler than the Sberbank-Magna offer, which gives GM a 35 percent share and distributes the remaining ownership between Sberbank, Magna and Opel’s dealers and employees.

Both the UK and German governments have committed funds to underwrite the Sberbank-Magna transaction. This financial support is part of an effort by these governments to protect manufacturing jobs in both countries. Industry-watchers have suggested that Beijing Auto may derive some advantage from the fact that they don’t require government funding to complete the deal.

Just two days after the Opel bid was announced, state-owned Guangzhou Automobile Group signed a joint venture agreement with Fiat Group as part of the lead up to the G8 summit in the Italian city of L’Aquila. Italian Premier Silvio Berlusconi and Chinese President Hu Jintao witnessed the signing of the deal during Hu’s recent visit to Italy.

The joint venture, which will begin making cars in the second half of 2011, plans to produce Fiat’s Linea sedan as well as two different engine models at a new factory in Changsha, the capital of Hunan Province. Investment in the joint venture will total €440 million.

This is not GAG’s first experience cooperating with overseas carmakers. The company teamed up with Fiat in 1998 to develop the first vehicle to be made under the GAG brand. It also has partnerships with Japanese carmakers Honda Motor Company and Toyota Motor Corp.

Both transactions, which are a continuation of China’s recent overseas investment spree, show the manufacturing and financial strength that the country’s automakers now wield. At a time when America’s GM is under bankruptcy protection and Germany’s Mercedes-Benz is closing factories, Chinese automakers like Chery, Beijing Auto and GAG are spreading their wings and buying up overseas assets at distressed market prices.

Earlier this year, Tenzhong Heavy Industrial Machinery Company, a maker of infrastructure building materials and special-purpose vehicles, announced that it had reached an agreement to purchase GM’s Hummer brand. Although the deal faces significant regulatory hurdles, Tenzhong’s acquisition is emblematic of the impact Chinese companies now have on the world market. Before announcing the Hummer deal, Tenzhong was an obscure road-building company in Sichuan. Today, it is involved in one of the highest profile transactions in the automotive world.

To be sure, Chinese carmakers have the wind at their back. China is set to pass the U.S. as the world’s largest vehicle market later this year. The Ministry of Commerce has simplified the rules for overseas acquisitions and started a “go abroad” campaign. Chinese banks are now allowed to finance acquisitions, a practice that was previously not allowed.

All of this, combined with China’s dominant position in manufacturing and its ready supply of cash, makes it inevitable that Chinese car companies will assume a greater role in the worldwide industry. It only remains to be seen what that role will be.

(China.org.cn July 9, 2009)

Shanghai Automotive Industry Corporation Group (SAIC) said it will invest over 12 billion yuan ($1.76 billion) in the new energy automotive industry, and plans to roll out its own-brand new energy vehicles from next year, Shanghai Securities News reported.

The 12-billion-yuan package will be invested in 41 major projects, including new energy auto projects for the 2010 Shanghai World Expo as well as other high-tech industrialization projects, according to SAIC.

Li Jirong, vice president of SAIC, said over the weekend that the automotive industry would soon meet a bottleneck unless it shifts its focus to upgrading the product and industry structure to develop clean and energy-efficient cars.

SAIC’s management said Sunday the company is working on mass production of new energy vehicles, including hybrid and electric cars.

According to the plan, SAIC Motor Corp, China’s biggest carmaker, will launch a hybrid vehicle – Roewe 750 – which uses 20 percent less gasoline, in 2010. The company will supply thousands of new energy vehicles when the World Expo opens in Shanghai next year.

In 2012, it will debut the Roewe 550 – a plug-in hybrid electric car that can save more than 50 percent of gasoline, as well as “zero-emission” electric cars.

The Shanghai municipal government has also vowed to provide supporting measures, such as preferential policies, subsidies and government purchase, to the development and manufacturing of new energy vehicles. It will also help the industry in R

China’s commerce ministry said Friday that Chinese government strongly opposes the United States’ proposed duties on Chinese tires, as such a move could be a sign of trade protectionism.

China is “highly concerned” about the tariff remedy plan on Chinese tires recommended by the US International Trade Commission (ITC), said the ministry in a statement on its Web site, citing unnamed sources with Bureau of Fair Trade for Imports and Exports under the ministry.

Members of ITC suggested Monday that the US should impose 35 to 55 percent duties in the next three years on certain Chinese passenger vehicles and light truck tires as the imports of such products would cause or threaten to cause market disruption to the domestic producers of like or competitive products.

The recommendation has been “unreasonable and lacks of objective evidences”, said the statement, adding that such action would baffle tire trade between China and the US, and in turn harm the interests of American tire consumers.

The statement says that Chinese-made tires did not cause direct competition with the US products. Restriction on Chinese imports can not fix the structural problem in the US, it said.

The Chinese government would urge the US not to take such protective measure, which would “send a wrong signal of trade protectionism,” said the statement.

(Xinhua News Agency July 4, 2009)

General Motors Corp may be struggling mightily in the US, restructuring under bankruptcy protection, but the automaker has harvested a half-year sales record in China, where it promised to “continue to invest in heavily”.

GM China Group yesterday reported that the company and its two local joint ventures sold 814,442 vehicles in the country in the first six months, representing an increase of 38 percent from the same period last year, after its June sales continued the robust growth with 61.6 percent over last year.

The government’s stimulus measures have helped boost the demand of small cars and minivans.

For the first time, GM and its joint ventures exceeded domestic sales of 100,000 vehicles in each of the first six months of the year.

The bullish market also made GM, the first auto company to release June and first-half sales figures for China, raise its expectation for the booming domestic auto market for the whole year.

“We expect China’s industry-wide auto sales to reach 10.4 to 10.5 million units in 2009, up about 15 percent from 2008,” said Kevin Wale, president and managing director of GM China.

The company had forecast in April that vehicle sales in China might increase between 5 percent and 10 percent.

Wale refused to disclose specific numbers on the whole-year sales target for GM China.

However, Wale said: “We could say that GM sales in China will definitely outpace the 15 percent market growth. GM China vehicle sales are expected to remain strong in the second half of 2009.”

In the first five months, China’s automobile sales increased 14.3 percent to 4.96 million units, with 3.36 million passenger cars sold across the country, a 21-percent jump over last year, according to statistics from China Association of Automobile Manufacturers.

The association may release half-year figures next week.

“China’s vehicle market continued to outpace most expectations for growth,” said Wale.

“The market benefited from stimulus policies adopted by the Chinese government as well as growing demand for personal transportation in tier-three and tier-four cities and rural areas,” he said.

This year, the government has halved retail taxes on small cars and it plans to give 5 billion yuan ($729 million) in vehicle subsidies in rural areas to drive up automobile consumption after sales last year rose at the slowest pace of 6.7 percent, to 9.38 million units, in a decade.

“The majority of GM products sold in China have engines under 1.6 liters. They are benefiting from the tax reductions.

“And the 5-billion-yuan subsidy to encourage farmers to move to mini-commercial vehicles from farm vehicles is having a positive impact on our Wuling minivan sales,” Wale told China Daily.

The Detroit-based company filed for bankruptcy protection on June 1 in the US. However, it promised that its operations in China “will stay largely unaffected”.

The automaker cut its workforce, closed factories and sold assets worldwide to weather its dreary auto sales in the US.

Despite its struggles elsewhere, Wale said GM’s early planning of doubling sales from 2008 to about 2 million units over the next five years in China, would remain unchanged.

Moreover, “we are rolling out great new products under each of our brands, expanding our distribution network and growing our product development capability,” Wale said.

“GM is committed to long-term development in China.”

(China Daily July 2, 2009)

Chinese manufacturers rolled out a record 89 new auto models in the first half of this year amid the industry boom, said an official with the China Association of Automobile Manufacturers (CAAM) Tuesday.

“Eighty nine models in six months, that is to say one model for every two days, which is unprecedented,” said Zhu Yiping, the assistant of CAAM’s secretary general.

More than 40 models are domestic brands. There are 73 sedans, nine sports utility vehicles (SUV), six multi-purpose vehicles (MPV), and one commercial vehicle, Zhu said.

Sales of China’s domestically-made automobiles topped 4.96 million units in the January-May period, up 14.29 percent from a year earlier, thanks to the government stimulus measures, according to the CAAM data.

Both output and sales of domestically-made automobiles in May exceeded 1.10 million units. It was the third month in a row that topped the 1 million unit mark.

The world’s largest auto market is expected to sell 10.2 million vehicles in 2009, up 8.7 percent year on year.

Zhu said domestic makers will unveil more than 50 new models in the latter half of this year.

(Xinhua News Agency July 1, 2009)

Authorities in southwest China’s Sichuan Province confirmed Monday that Tengzhong company’s plan to buy General Motors Corp.’s Hummer unit was still being examined by concerned departments and there had been no definitive result toward approval.

Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd. (Tengzhong), a private Chinese firm, struck a preliminary deal with General Motors Corp.(GM) for the premium SUV brand Hummer June 2.

Tengzhong, based in Deyang of Sichuan, clarified one day later via Zhao Xiaolu with Brunswick Group Ltd, which is handling the public relations matters for the Tengzhong deal, that it had no plan to manufacture Hummer in a Chinese plant. The size of the deal has been kept unknown.

The preliminary deal allows Tengzhong to keep the management and operational team along with the Hummer brand, and secure more than 3,000 jobs in the United States. The Chinese buyer will also assume existing dealer agreements relating to Hummer’s dealership network.

Tengzhong, however, has to go through other procedures, including getting approval from the Ministry of Commerce and the National Development and Reform Commission (NDRC), before it can finish the deal with GM by the end of the third quarter of this year in accordance with a schedule.

The acquisition plan has drawn unprecedented attention and has even been shrouded in mystery since the plan was announced as Tengzhong executives have been shunning the media.

Speculations vary. Some media reports said NDRC is likely to reject Tengzhong’s acquisition plan, citing two reasons — Tengzhong’s lacking the expertise to run Hummer and Hummer gas-guzzling vehicles conflicting with Beijing’s conservation goals.

Yan Zhuolin, chief of foreign trade and economy with Sichuan Provincial Commerce Department, said in a phone interview with Xinhua that he hadn’t heard of any progress regarding the Chinese Commerce Ministry’s approval of Tengzhong’s acquisition plan.

Yan emphasized that, given the size of the deal, Tengzhong needed to get approval both from the Ministry of Commerce and the NDRC, which was necessary in accordance with the stipulation of Chinese laws regarding Chinese companies investing overseas.

Sources with the Sichuan Provincial Development and Reform Commission said Monday they did not receive any information on theapproving process of Tengzhong’s acquisition plan.

Zhao Xiaolu with Brunswick Group Ltd said Monday she had noticed recent rumors about Tengzhong’s acquisition plan, to which Tengzhong would make no comments or response.

“Tengzhong has been cooperating closely with concerned Chinese government departments as required so as to get the approvals done,” said Zhao, who refused to disclose more details about the approving process.

(Xinhua News Agency June 30, 2009)

China’s growth in vehicle sales accelerated in May as the government’s economic stimulus efforts continue to deliver remarkable results. Total light vehicle sales in the month increased 41 percent over the same period a year ago, an 11 percent faster growth rate than recorded in April.

May sales of 1.06 million light vehicles – which include passenger vehicles (PVs) and light commercial vehicles – topped one million units for the third consecutive month.

Both vehicles enjoyed rapid sales growth, with 684,000 passenger vehicles sold, up 40 percent year on year, while light commercial vehicle sales topped 384,000 units, an increase of 43 percent from the same period of last year.

While most countries in the world – developed and emerging – suffer through the worst economic conditions in 60 years, China is on pace to grow by 6.5 percent this year, an even more remarkable achievement since China relies so much on the rest of the world to sell its goods.

Conditions have improved dramatically since the beginning of the year, when expectations for growth hovered around the 5.8 percent. The government’s commitment to stimulate the economy through fiscal spending and liberal lending practices is boosting the economy and driving vehicle demand higher.

Contributing to strong May sales was the timing of International Auto Show at the end of April. A recent recovery in property and stock prices also increased consumer willingness to spend on big ticket items. Year ago May sales were negatively affected by the earthquake in Sichuan, a fact that also contributes to the rapid relative growth rate in the same month this year.

The mini car, sub-compact and compact car segments continue to feel the positive impact from the tax incentive for 1.6-liter and smaller engine sized cars, with each segment growing by more than 50 percent year on year in May.

Emerging signs suggest the midsize car and MPV segments, more reliant on business purchases, may perform better in the second half of the year if the economy continues to show solid growth.

Insufficient capacity is the greatest concern for producers of hot-selling models, including Beijing Hyundai, BYD and Wuling. These three brands continue to outpace the overall market with growth rates of 83 percent, 218 percent and 83 percent respectively.

Companies producing Japanese brands, apart from Dongfeng Nissan, are finding themselves in an unfamiliar position: Trailing the overall market. Sales of Toyota brand models are down 12 percent for the month of May and 20 percent for the year.

Nissan turnover remained strong in May with sales increasing 54 percent from the same period of last year. Tiida was the second best-selling sub-compact car thanks to its large interior space and appealing exterior. Together with Livina, Tiida helped Nissan capture the largest market share in the sub-compact car segment. The Teana is beginning to intrude on the positions of Honda Accord and Toyota Camry. By the end of May, its volume grew 148 percent compared with the year-ago period. Teana is expected to make the biggest contribution to the growth of the Nissan brand this year.

Looking ahead, early indications from the retail market suggest that sales in June are not as hot as in May, though June sales are historically higher than May. Government efforts to simulate demand are working beyond expectations and a review of full year forecasts will likely lead to an upward revision in July.

The authors are senior market analysts of JD Power Asia Pacific Forecasting

(China Daily June 29, 2009)

Chery Automobile Co, an emerging carmaker from the Chinese mainland, has agreed with Taiwan’s Shengrong Auto, a subsidiary of Prince Motors, to make its own brand cars on the island for the local and other markets.