The world’s car industry pins its hopes on China


Sales of passenger cars in Asia’s largest economy have increased for two months
Newsfeed25 Sep 2020
Photo credit: AFP Photo


MAINLAND CHINA & HONG KONG

For two years, falling sales seemed to spell the end for China’s time as the world’s most vital car market. Then came the coronavirus, followed by a swift recovery that has left Europe and the US in its dust.

Now – more than ever – China is the focus of the hopes of automakers around the globe. Sales of passenger cars in Asia’s largest economy have increased for two months, while the other major markets have continued to shrink, with Europe slumping 18% in August. And China is set to be the first to bounce back to 2019 volume levels, albeit as late as 2022, according to researchers including S&P Global Ratings. All the while maintaining its hefty lead over Europe and the US.

The world’s biggest car market since 2009, China can still grow for the foreseeable future because of its relatively low penetration and expanding middle class. Yet merely being there does not automatically spell success for global giants such as Volkswagen AG (VOW GR), Toyota Motor Corporation (7203 JP), and Tesla Inc (TSLA US) – they need to contend with state-supported champions like SAIC Motor Corporation (600104 CH), Zhejiang Geely Holding Group Co Ltd, and NIO Inc (NIO US), all increasingly aggressive in defending their home turf while eyeing an expansion beyond it.

Underscoring the speed of the recovery, China is hosting the world’s first major post-outbreak auto show starting Saturday. Virtually all global brands from mass-market manufacturers to luxury marques will be competing for attention over the next 10 days with local electric-vehicle upstarts such as Xpeng Inc (XPEV US), which listed in New York last month and is attending the show for the first time.

China’s importance is boosted by its focus on nurturing the electric car ecosystem, a technology shift in which automakers have invested billions of dollars. The government wants new energy vehicles to account for 15% or more of the market in 2025, and at least half of all sales a decade later. And carmakers are pouring money into China to prepare for the seismic change.

A thriving Chinese market could encourage the local companies to finally expand in the west after years of planning. SAIC Motor’s (600104 CH) MG unit started selling electric SUVs in Europe this year, and rivals including billionaire Li Shufu’s Geely (175 HK) have announced plans to do so. Geely (175 HK) has been the most active Chinese player with equity investments in Europe: it snapped up a 10% stake in Daimler AG (DAI GR) in 2018 after buying Volvo (VOLVB SS) Cars in 2010.

Challenges remain: China’s economy is still recuperating, and the quickly developing electric vehicle market may be prompting some buyers to put off purchase decisions until more models have come out and proven their reliability. But the odds for China’s car market to thrive are still better than for other regions. – Bloomberg News.

On Thursday (24 September), the Shanghai Composite Index lost 1.72% to 3,223.18 and the Hang Seng Index shed 1.82% to 23,311.07.

 

REST OF ASIA

Consumer confidence in South Korea slipped for the first time in five months as a jump in virus cases and tighter social restrictions made households more pessimistic about the economy’s outlook.

The consumer sentiment index fell to 79.4 in September from 88.2 the previous month, the Bank of Korea said in a statement Friday (25 September). The 8.8 point decline was the largest since March when the country was reeling from the first wave of the pandemic.

South Korea’s economy showed signs of recovery at the start of the quarter, but the early momentum lost steam as daily virus case counts soared to hundreds in August. While the government has avoided imposing an economy-wide lockdown and instead opted for targeted restrictions, the flare-up is still expected to have a significant impact on consumption and services.

The virus resurgence was a key factor when the central bank slashed its economic outlook for this year to a 1.3% contraction in August, from an earlier forecast for a 0.2% decline in May.

While South Korea has since managed to bring down daily caseloads to a little over hundred from the peak of more than 400 in August, health officials warn the upcoming Chuseok holiday could reignite infections with increased gatherings. – Bloomberg News.

South Korea’s Kospi Index rose 0.57% to 2,285.62 at the open on Friday. It tumbled 2.59% to 2,272.70 the previous session.

The S&P/ASX 200 Index rebounded 0.88% to 5,927.90 at the open on Friday after falling 0.81% to 5,875.90 on Thursday.

The Taiwan Stock Exchange Weighted Index erased 2.54% to 12,264.38.

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