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GM Defies Downturn in Chinese Market

Sales up overall but some problems appear.

by on Jun.06, 2012

GM China President Kevin Wales.

Signs of a looming economic slowdown failed to stop General Motors and its joint ventures from chalking up record sales in China last month – though it remains to be seen if the U.S. maker can continue to defy the unexpected downturn that is tripping up much of the rest of the Chinese economy.

That could be a serious problem for GM which saw record sales of more than 2 million vehicles in China last year, a surge in demand that helped it regain its position as global automotive sales leader.  GM is, meanwhile, hoping to more than double that figure, targeting Chinese sales of 5 million by mid-decade.

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Whether the Chinese market will cooperate is uncertain. Auto sales actually slipped during the first quarter, though the general consensus has been for about 10% to 12% growth for the full year — but even that target, modest by recent Chinese standards, is now in question.

“The increase in auto sales in China has recently slowed dramatically, and we expect this trend to continue because of slowing economic growth, high gasoline prices, and the expiration of government incentives for car buyers,” warns Standard & Poor’s credit analyst Robert Schulz.

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Jaguar Land Rover Teaming up with China’s Chery

Too little too late?

by on Mar.22, 2012

Jaguar and British sibling Land Rover have inked an alliance with Chery Automobile to produce cars in China.

British maker Jaguar Land Rover is the latest to ink a deal with a Chinese partner – but with signs the Chinese market may be slowing, the question is whether the move is too little too late.

The new partnership with China’s ambitious Chery Automobile Company will lead to the production of both Jaguar and Land Rover vehicles, as well as powertrains, at a facility in the booming Asian market – which has outsold the U.S. for the last several years.

But the specifics have yet to be announced and will be subject to approval by Chinese regulators – a process that can drag on for some time.  Fuji Heavy Industries has been waiting since last year for the go-ahead on a deal that would lead to production of its Subaru line in China.  Nonetheless, officials at India’s Tata Motors, which owns JLR, expressed optimism.

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“Demand for Jaguar and Land Rover vehicles continues to increase significantly in China and we believe that JLR and Chery can jointly realize the potential of these iconic brands,” Jaguar Land Rover CEO Ralf Speth, said in a statement.

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Is China’s Car Market About to Stall?

Sales to miss government’s already modest expectations; margins also softening.

by on Mar.22, 2012

Mercedes is reportedly slashing prices by as much as 25% in China.

At a time when the world auto industry was ready to collapse, the Chinese market offered a rare and desperately sought beacon of hope.  Even as demand in the U.S. market plunged to its lowest levels in decades, China continued to deliver double-digit growth, propelling the emerging market to global sales leadership.

Ironically, as the U.S. market recovery begins to heat up, China is showing signs of an unexpected slowdown – one that is proving particularly worrisome in the luxury segment, and which could slam manufacturers like Mercedes-Benz, BMW and Audi who have counted on China for a disproportionate share of their profits in recent years.

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For the year-to-date, Chinese light vehicle sales are down a notable 4.4%.  The China Association of Automobile Manufacturers now predicts overall sales will only grow by about 5% for the full year – missing the government’s goal of 7%.  By global standards, that’s nonetheless significant – but put into perspective it’s clearly worrisome when one recalls recent annual growth rates that, at times, approached 100%.

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