Tokyo July 2015 - Bloomberg Professional Services...July 2015 2 Short Term: –SUV and Luxury –Capacity Utilization –Registration Cap Long Term: What is the Next Driver? 3 4 Not
Short Term: –SUV and Luxury –Capacity Utilization –Registration Cap Long Term: What is the Next Driver?
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Not new here. Sales of SUVs have been strong. �Not gas guzzlers.
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Half of new models in the next 9 months are SUVs and half of those are compact SUVs�
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GM is benefiting with the new China-only envision�Chery, Great Wall, BYD SUV margins are up to 3x higher�Profit margin likely fall �
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Sales were down
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Short Term: –SUV and Luxury –Capacity Utilization –Registration Cap Long Term: What is the Next Driver?
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Utilization Rate for China Carmakers Drops on Plants, Inventory The factory usage rate for Chinese passenger-vehicle producers may drop three to 12 percentage points to 70% this year, based on BI analysis. If carmakers cut production to reduce inventories that have grown in the eight months through December, then the utilization rate will drop to 70%. The manufacturers are expanding production capacity by about 13% while vehicle sales may only rise 7.5%, based on the average of forecasts compiled by BI.
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Utilization Rate for China Carmakers Drops on Plants, Inventory The factory usage rate for Chinese passenger-vehicle producers may drop three to 12 percentage points to 70% this year, based on BI analysis. If carmakers cut production to reduce inventories that have grown in the eight months through December, then the utilization rate will drop to 70%. The manufacturers are expanding production capacity by about 13% while vehicle sales may only rise 7.5%, based on the average of forecasts compiled by BI.
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Honda, Japan Carmakers' China Plant Usage Trails Overseas Rivals Japanese automakers may operate vehicle assembly plants at a 77% utilization rate this year, the lowest of foreign producers in China, based on BI analysis. A lack of new models and lingering tensions caused by the two countries' territorial dispute led to stagnant China sales for Japanese carmakers in the past two years. Nissan sales in China rose 0.5% in 2014, less than the industry's 9.9% growth in the country. While Honda's grew 4.1% and Toyota's climbed 2.5%, they both missed sales targets.� Japanese cap util should improve�New corrolla and levin from toyota�New XR-V, Fit and Vezel crossover
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VW, Mercedes Boost China Production Capacity 23% as Demand Grows European automakers operating in China are increasing production capacity about 23% this year, based on BI analysis, to capture increased demand. Factories for brands including Volkswagen and Mercedes are producing near designed capacities. Sales of European-branded passenger vehicles surged 19.4% in China last year, compared with 9.9% growth for the overall market.
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GM, VW, Hyundai Surging China Growth Faces Plant-Capacity Limits U.S., European and South Korean automakers' surging sales growth in China may be limited by their factories, which are near manufacturing capacity. Recent expansion in capacity has been taken up as overseas carmakers in China, such as the top three GM, VW and Hyundai, gained market share from domestic brands after the government stopped subsidizing the purchase of local marques in 2011. Japanese carmakers also lost some market share amid lingering tension over a territorial dispute with China.��GM and Ford is adding about 28%�Japanese are not adding but have plans to do so in about 3 years�Mercedes is about 200k this year and next for more C-Class capacity and capacity for the new GLA crossover�BMW is adding about 100k next year�
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Short Term: –SUV and Luxury –Capacity Utilization –Registration Cap Long Term: What is the Next Driver?
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World-Class Congestion May Bring Auto Caps to Chongqing, Chengdu Seven of the world's 25 most-congested cities are in China, including Chongqing, Chengdu and Shijiazhuang, according to the TomTom Traffic Index. These cities, which have yet to cap new-vehicle registrations, are likely to do so in the future, slowing auto sales. Chengdu and Chongqing had sales increases of more than 20% in 2014, outpacing nationwide growth of 10%. Pollution is another major consideration when local governments impose registration limits. China's Registration Cap May Cut Auto Sales 2 Percentage Points China's passenger-vehicle sales growth may drop as much as 2 percentage points if a tier-two city like Chengdu imposes a cap on new-vehicle registration, according to BI analysis. Chengdu registered about 630,000 new passenger cars last year, about 2.75% of national sales. A cap similar to Shenzhen's may cut Chengdu sales in half. New cars that replace old ones are exempt from registration limits. China's passenger-vehicle sales will grow about 7.5% this year, down from 10% last year, based on consensus.
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Short Term: –SUV –Capacity Utilization –Registration Cap Long Term: What is the Next Driver?
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Chinese Roadways in Short Supply for Exploding Car Population China is behind in paving new roads for its burgeoning numbers of cars. Passenger and commercial vehicles on the road reached as many as 149 million, nearly double the 2010 level. Tier-one cities in China, including Beijing, Shanghai, Guangzhou and Chongqing, have road networks that are measured at less than 1 kilometer per 1,000 people, trailing London's 5.7 and New York City's 4.8, based on data from TomTom Traffic Index.
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China Needs Roads to Make Room for More Autos; Ease Congestion China is quickly running out of roadway capacity. The length of Chinese roads rose at a CAGR of 3.4% in the eight years through 2013, while vehicle population surged at a 19% CAGR. At the current rate, China road network will not reach the size of today's U.S. network for another 10 years. China's vehicle density should rise to as much as 280 per 1,000 persons by 2025, up from about 100 now, based on BI analysis. China's vehicle density is unlikely to match the U.S.'s 770 vehicles per 1,000 people.
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China's Future New Car Sales May Rely More on Used Car Market China's growth in new-vehicle sales will increasingly depend on the replacement-vehicle market as roads become more congested. Some car owners will opt to buy new vehicles when they sell their old ones. China's used-car market is currently much smaller than the new one. Many Chinese car owners have yet to trade in their first vehicle, resulting in a ratio of used-to-new car sales of only about 0.3, compared with 3.3 in the U.S. and 3.0 in the U.K., according to data collected by the auto auctioneer Manheim.
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