China Autos Set for Long Slowdown
China’s automobile association has lowered its sales outlook for 2011, dealing a further blow to the industry and especially to China’s embattled domestic car makers that specialize in the kinds of cheaper, more fuel-efficient models that look set to take the biggest hit as the market cools. The auto association’s latest numbers show that passenger vehicle sales rose an unexpectedly strong 8.79 percent in September, as buyers rushed to take advantage of government incentives that expired at the end of the month for smaller, more fuel efficient cars. (English article) The association, which has become quite bearish in recent months, lowered its outlook for the market in 2011 despite the strong September, saying it now forecasts China’s auto sales will rise just 3 percent this year, down from a previous 5 percent, which was already well below the 10 percent growth most were looking for at the beginning of the year. The industry looks set for a particularly long slowdown in my view, as Beijing not only wants to slow down consumer spending to cool the economy, but also wants to ease congestion on China’s crowded roads by severely limiting the number of new car licenses. Smaller and medium sized domestic car makers, especially those without foreign partners, will feel the biggest pain in this downturn, with names like BYD (HKEx: 1211) and Chery the most vulnerable among the top 10 brands. Separately, Swedish media are reporting that Saab, the dying Swedish automaker looking for a lifeline from a couple of obscure Chinese companies, has received a $15 million bridge loan from one of those companies, Youngman Lotus Automobile, which, together with Pangda Automobile (Shanghai: 601258), is waiting for Beijing approval to give Saab a $300 million cash infusion. (English article) This $15 million might be enough to fund Saab’s operations for a few days or even a month, but I still stand by my previous prediction that China’s central planner ultimately will veto the larger investment, and Saab will be forced to look elsewhere for funding or face probable closure. (previous post)
Bottom line: The auto industry’s latest downgrade for China’s car sales this year foreshadows a long downturn ahead, as Beijing looks to cool consumer spending and ease road congestion.
Related postings 相关文章:
◙ Foreign Spending Spree Augers Woes for China Car Makers 外国车企大举投资中国 本土车企倍感压力
◙ Message to Saab: Don’t Count on China 萨博不应指望中国注资
◙ Chery, Luxury Cars Hit New Speed Bumps
