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August 15, 2007

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Chinese Car makers hit bump in the road

From: Shanghai Daily

Only two of the top 10 car makers in China have reached their half-year sales targets after major car makers aggressively raised forecasts at the beginning of this year.

But while Shanghai Volkswagen and Chery could celebrate midway, car makers - with a sales increase of 26 percent to 2.53 million units in the first six months of 2007 - will find it difficult to meet the optimistic year-end sales targets as the market matures after several years of development.

A Shanghai Daily overview gives a rundown on how the country's car makers have fared so far this year and what could lie ahead.

American brands

American original equipment manufacturers' brands saw their market share dip from 14 percent at the end of last year to 12.9 percent in the middle of this year, according to a report from Automotive Resources Asia.

First-half passenger vehicle sales for General Motors Corp increased 11 percent to more than 221,700 units in China compared to the same period in 2006. The increase was less than in the overall market because of a lack of new models.

As a result, GM dropped back a full point in overall market share to 9.7 percent in the first half.

Much of GM's market share drop could be attributed to sales declines in its smaller-sized sedans such as the entry-level Chevrolet Spark and Buick Sail.

Its high-volume Buick Excelle model and mid-size LaCrosse also showed some signs of slowing sales despite their overall sales increases so far, the report said.

Ford is also facing challenges.

Sales were up 29 percent in the first six months, allowing Ford to maintain a 3.1-percent share of the overall market. Sales of the Ford Focus were up 63 percent year on year to 44,428 units to make it the car maker's top seller.

"The concern for Ford is that the Focus is getting little help, with Mondeo sales off 16 percent in the first half, and its new S-Max people-mover gaining little traction," said Timothy Dunne, an analyst from ARA.

Ford is planning to introduce the latest version of its Mondeo to further push sales in the second half and continue its explosive sales spurt over the past two years.

European brands

Sales of the other early entrant into the China market, Volkswagen AG (which includes luxury brand unit Audi), have rebounded strongly, after the successful launch of new models that target different market segments.

VW's sales were up 25 percent in the first half of this year to 431,369, allowing the auto maker to increase its market share from 16.4 at the end of last year to 17.4 percent at mid-year 2007.

VW has been able to almost uniformly lift sales of its high-volume cars such as the VW Jetta, the best-selling model in China with 101,223 sales in the first six months, as well as its luxury Audi A6 and A4 entries.

With the introduction of the Skoda brand and its revamped Magotan mid-to-high sedan, the car maker should sustain momentum in both sales and profitability for the rest of the year.

In contrast, Italy's Fiat has taken a battering, with half-year sales down 35 percent and May and June sales down even lower.

The car maker is widely expected to continue to lose in the Chinese market until its cooperation with China's Chery's Automobile Co Ltd starts in 2009 and brings in new models like the popular Alfa Romeo.

Asian brands

Sales of Toyota brand vehicles are up 70 percent this year, allowing the world's largest auto maker to increase its market share from 6.6 percent in 2006 to 7.6 percent in the first six months of 2007.

The mid-size Camry has made the bulk of the sales for Toyota. The car netted 80,000 sales in the first half of this year, making the Camry the second best-selling vehicle in China.

"But it hasn't been all easy-going for Toyota; sales of the Corolla and the Reiz, two of the company's top performers in 2006, were down more than 20 percent," said ARA's Dunne.

After a strong performance in 2006, which saw Korean brands net 420,000 sales and a 9.9-percent share of the China market, three of the country's car makers - Hyundai, Kia and small SUV-maker Ssangyong - are under pressure in the first half of 2007.

"The Korean car makers suffered a lot from their overlapped pricing and product strategy," Zhang Xin, an analyst from Guotai Jun'an Securities Co Ltd told Shanghai Daily.

Hyundai's sales were down 13 percent and Kia lost 17 percent, helping to drive Korean brand market share down to 6.6 percent.

Chinese brands

Chery dominated its Chinese rivals for the first half of this year.

It increased sales by 44 percent in the first half to 207,094 units, lifting overall market share to 8.2 percent. It also improved technology capabilities after becoming the assembler for Chrysler Holdings LLC and its venture with Fiat is expected to help consolidate its lead.

Meanwhile, some Chinese makers saw their sales either slow or slip in the first half of this year. These include Geely, up only one percent, and FAW Xiali, down nine percent.

Some newcomers have started to make themselves noticed. Chang'an Group's sales jumped 384 percent to 31,254 units, in addition to a more than doubled growth for Brilliance's Zhonghua and Shenzhen-based BYD.

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August 15, 2007

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