Newsletter 9th September
Hi {name},
The Chinese car market is showing signs of slowing down in 2011 and will likely miss the goal of 20 million units that was largely touted at the beginning of the year – without pushing a major ‘we told you so’ we did mention this quite a while ago. The rate of inflation in China is clearly having a major effect on consumer buying power with staple goods such as pork, rice and cooking oil rising at outrageous prices month to month, this has lead to the Chinese government releasing its Strategic Pork Reserves – whilst other countries stock up on oil, China stocks up on pork to keep prices down when they get out of control. The most interesting thing in August 2011 was the slight fall of Ford’s sales whilst GM posted a good 13.4% increase in sales. Ford obviously have a much more limited line up than GM who wield Chevrolet, Buick, Baojun and Wuling brands in China but none the less it seems that Ford’s line-up is suffering from a lack of new models. The Great Saab drama entered a new phase this week when the Swedish Courts denied the company the bankruptcy protection that the company needs, now the workers unions are likely to push the company back into official bankruptcy. Saab’s Chinese partners have not been as fast as they could have been with their investment, Pangda and Youngman have apparently put forward their plans to invest in Saab to the Central Government which must approve any overseas investment over 100 million USD. There are potentially two routes that Pangda/Youngman are pushing to achieve here, either they are genuinely looking to save Saab with investment and plan to establish a manufacturing facility in the China, or they are waiting for Saab to enter bankruptcy and pick up the company at a fire sale. The problem with route no 2 is that the majority of the IPR is owned by GM that license it to Saab, and then there is the Saab brand which belongs to the Saab Aerospace Group and is also licensed to the car company. So what could a Chinese company possibly gain by buying out Saab? It seems that exploiting the Chinese market is the best route at this stage. In a recent interview with Sohu, Youngman CEO Pang Qing Nian made it clear that he truly believes that Saab can be salvaged with Chinese investment and went onto state that it was very unlikely that the company would close for good. This week you may notice that the title of this newsletter is Live from Beijing rather than the usual Live from Shanghai, this week we’re hunkering down in Beijing for the Auto Parts Show that is being held here. The parts show also has an ever growing tuning and modification section that is catering to the growing Chinese automotive aftermarket. Chinese consumers, just like their Western counterparts, are increasingly craving individuality with their automotive purchases, lowering, modifying, improving, and installing sound systems that could carry out successful CPR on a long dead corpse are now all the rage. This area of the market has so far been ignored owing to a lack of distribution networks and interest in the area. Beijing seems to be the corner stone of the auto modification market with young boys – and girls looking for ways to make their cars unique, whilst other cities citizens are eager to low quality plastic parts to their cars Beijing drivers seem to be taking modification to a higher level and could easily rival overseas car modders in terms of style. As incomes increase, but with the inability to buy new cars in cities such as Shanghai and Beijing it is likely that
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