Luxury Cars Zoom, But Who Profits?
China’s formerly red-hot auto market looks set to stall this year, but you would never know that from looking at luxury car sales. The only problem from a domestic investor’s point of view is that the market is almost completely monopolized by foreign firms, Germans in particular. The country’s 3 top luxury car sellers, Volkswagen’s (Frankfurt: VOWG) Audi, BMW (Frankfurt: BMW) and Mercedes-Benz (Frankfurt: DAI) all saw their China sales rise 30 percent or more in the first 10 months of this year. (English article) That turbo-charged growth came even as the broader market stumbled and the country’s main industry association forecast just 5 percent growth for the year, as Beijing took steps to tame inflation and ease congestion on the nation’s busy roads. The logic behind the strong luxury sales isn’t hard to see. As China makes it more difficult for people to buy new cars through measures such as restricting new licenses and phasing out incentives for cheaper, more gas efficient models, a bigger percentage of sales will go to the luxury segment that is far less price sensitive. What’s more, luxury cars in China now account for just 8 percent of the total car market, compared with 10-20 percent in the West. Right now the best bets from China to capitalize on this trend are limited. Audi’s China partner, FAW Auto, isn’t publicly traded, and even if it was the brand looks set for a rough road as it rapidly loses share to its aggressive German rivals. BMW also makes cars in China with partner Brilliance China Automotive (HKEx: 1114), while Mercedes-Benz parent Daimler works with privately held BAIC, which has said for several years now it wants to make an IPO. BAIC has shown aspirations to build its own higher-end models with its purchase of several older models a couple of years ago from Swedish automaker Saab, which is now near death. Another interesting play could be Geely (HKEx: 165), which is trying to reposition its recently acquired Volvo nameplate as a luxury brand in China. (previous post) I’m dubious whether this plan can work, but if it does then Geely could see itself also in a strong position as sales of its more mainstream cars slow in this latest downturn.
Bottom line: The German automakers are best positioned to capitalize on China’s luxury car boom, but domestic names like BAIC, Brilliance China and Geely could also benefit.
Related postings 相关文章:
◙ China Autos Set for Long Slowdown
◙ Chery, Luxury Cars Hit New Speed Bumps
◙ Geely-Volvo: Good First Year, But Fork in the Road Ahead
