Car Sales Stagnate in China for the First Time in Almost a Decade

Emerging markets and China in particular, are key to the development of automotive luxury.

Abel Amón. 13/08/2015
Ferrari China 2
Ferrari 458 Italia 20th Anniversary Special Edition. Click for more information

The sharp fall of the Chinese stock market in recent months, with the potential cooling of the Asian giant’s economy in general and the decline in consumer confidence, bind to the difficulties caused by the government’s anti-corruption campaign. Serve as an example the sale of Ferrari only 285 vehicles in 2015 compared with 344 in the first half of last year. While the company saw 784 deliveries to Greater China in 2012, the year he began the campaign against corruption, the number dropped to 700 in 2013.

Sales of all types of vehicles including buses and trucks increased by 1% in the first half of 2015, reaching 11.85 million units. Based on this overall figure, we see brands and affected more than other vehicles. While GM has sold in June 2015 fell 0.4 more Volswagen Ford 17% and 3%.

Ferrari China
Luxury cars in China

Premium in the sector see a mixed performance, with falls to 6% Audi BMW 0.2, while Mercedes, with the support of the demand for models like the C-Class sedan, deliveries of Daimler AG rose 19 percent to 169,616 vehicles last June.

It added that automakers are pressuring dealers to accumulate more stock, which on one hand makes up the actual sales of the manufacturer and other places to dealers in financial trouble.

Rolls Royce Wraith
Rolls Royce Wraith. Click for more information

Corruption scandals, illegal racing.
In the luxury sector, there are difficulties too. For example, in February only 14 units of Rolls Royce vehicles that are adapted to the tastes of Chinese millionaires, with many custom details were sold. This in the face of anti corruption campaign also has the problem that officials who lead ostentatious vehicles are likely to be investigated. In fact one of the most flagrant cases of corruption one of the main advisers of Chinese President Hu Jintao was discovered after an accident that killed the advisor´s son said son and two other persons.

It is not the only case, there were a number of illegal races that ended with a spectacular accicente in tunnel no fatalities that involved two vehicles (a Lamborghini and a Ferrari) worth more than one million Euros, as well as causing significant damage in the tunnel. The young people involved have no known occupation, and it is better that parents are not state officials …

Accidente Lamborgini China


Ferrari and its IPO in the US.
Investors are following developments in China for the Italian brand that will soon be listed on the New York Stock Exchange in late 2015. The company must reconcile its artisan and exclusively with vehicles of very high prices with the momentum of growth Wall Street demands. Ferrari has its niche that allows relatively modest sales in number, achieve margins of several hundred million Euros. Of the 7000 unit that currently manufactures, seeks up to 9000 by 2019. Will it be enough for the American investor? We will see it.

Ferrari China 3
Ferrari 458 Italia 20th Anniversary Special Edition. Click for more information

The German premium brands, well positioned in China.
The luxury segment in China has already become the largest in the world and its weight will increase further in the next two decades, with Audi, BMW and Mercedes-Benz are well positioned in the Chinese market, Mercedes presenting, among them, the greatest potential for growth.

Audi began making cars in China in 1991, while BMW and Mercedes produced there for a decade, gaining great credibility these three German automakers in the luxury segment will be almost impossible to erode over the next decade. At present, apart from the three big German firms Premimum industry only Infiniti, Volvo and Cadillac are locally made to avoid import tariff of 25% for China, but sales remain modest: Volvo sold 80,000 vehicles in 2014 ( 47% of local production), while Cadillac 70,000 (57%) and Infiniti sold 30,000 units (8%).

Coches lujo China
Luxury cars in China

A further lurch to the aspirations of European manufacturers has occurred with the sudden devaluation of the Yuan, around 2%, the highest in the last 20 years. Logically such a priori devaluation favors those who have their manufacturing in China but do not rely heavily on imported components. This measure designed to boost export does not benefit at all to the Chinese domestic market and see what the final effect on the industry.

China, the engine of the motor sector.
Despite these economic problems, there is no doubt that China will remain the engine of the automobile industry, with perspective exceed 40 million vehicles in 2025. Consider that in a mature market like the US purchasing 53 new cars per 1000 inhabitants is while in China this ratio is only 17 and this figure will certainly grow soon. While East Coast cities are overcrowded vehicles, with plans by the authorities to curb the pace of enrollment to reduce pollution there tremendous, inner cities, many of them of several million people, have enormous potential growth. Recall that China has already surpassed the US in 2009 as the largest auto market in 2014 and sold 25 million units compared to 19 million in the case of the US and 18 in Europe.

BMW Serie 7
BMW 7 Series. Click for more information

Disclosure: The author is not responsible for the views expressed in the article. The text was written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.

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