NO END OF A SLIDE
Page 1: No End of A Slide
Page 2: Electrics • Autonomous • Ride-Sharing • New Deals
China's January light vehicle numbers are in -- and they are not pretty.
(Except for electric cars. But more on that in a minute).
Overall light vehicle sales declined a stunning 18 percent year-on-year.
January 2018: 2,395,000
January 2019: 2,010,000
That's a fall of nearly 400,000 units. If we take $22,000 as the average new vehicle transaction price, we are talking about a revenue shortfall of $880 million. In a single month.
This is China's 7th straight down month, something the Post-Mao generation has never seen. Even at GM and its mighty partner, SAIC, sales declined 11 percent in January.
Why the sustained market weakness? Three factors:
1. Confidence: Chinese consumer confidence has been shaken by the cloud of uncertainty hanging over trade and investment relations with the United States. As the saying goes, "There is no one on earth more audacious than a Chinese when times are good. And there is no one under the heavens more cautious than a Chinese once the weather turns."
2. P2P Lending Crackdown. At its peak, some 2,000 informal companies were channeling loans from wealthy coastal Chinese to aspiring middle class families living in inland cities. Then came a major regulatory crackdown last summer.
3. Mobility Choices. Increasing numbers of Chinese are opting for mobility as a service over car ownership. Some 550 million Chinese took 10 billion rides with Didi last year, according to company spokespeople. (That compares to 100 million users and 5 billion rides for Uber globally in 2018).
Also firing demand for mobility: Urban residents are growing tired of the costs of car ownership, including taxes, ever-increasing parking fees and insurance. Fuel - at $4.40 per gallon - is also not cheap.
What about electric vehicles? Well, they continue to buck the market trend in a big way. Chinese automakers delivered 98,000 EVs and plug-in hybrids in January, up 120 percent from the January 2018 level.
Driving EV demand: Quotas, mandates, subsidies, tax breaks and road access policies. Also, there is rising consumer acceptance as better EV models come to market and charging stations grow nationwide.
So, if you're sitting in Detroit or Stuttgart or Paris or Tokyo you might be asking yourself: How will the decline in Chinese car demand change my 2018 bonus, er, I mean, my company's prospects?
German luxury: Still smiling. Mercedes, BMW and Audi achieved record sales. (The wealthy, China will always have them).
Japanese: Think spectrum. Toyota strong. Honda steady. Nissan wobbly. Mazda shaky. Suzuki already out of the game.
Americans: Hurt locker. Ford and FCA sales down more than 30%. GM off, too, but less sharply.
French. Carnage. Peugeot sales sliding 50% since 2016. Never mind a bonus. Start thinking job security.
- PAGE 2 -
ELECTRICS • AUTONOMOUS • RIDE-SHARING• NEW DEALS
>> Arcfox. Look for Beijing Automotive's new Arcfox SUV model at the Geneva Auto Show next month.
Take: Chinese EV makers are beginning to see opportunity (and potential profits) at higher price points. Beijing Automotive's Arcfox brand is designed to be the company's equivalent to the Mini brand: A premium offering in a small package.
>> CATL/Honda. China's largest EV battery maker, CATL, and Honda are teaming up on battery development.
Take: Only a few years ago, Chinese-Japanese cooperation on electrics was unthinkable. In a rivalry colored by geopolitics, China pushed electrics while Japan endorsed fuel cells. Now, there is greater flexibility on both sides.
>> Aiways. Another Chinese electric SUV is on this way to market. This time the target is Europe. The product: Aiways U5, with more than 280 miles of range.
Take: There seems to be at least one Chinese EV in all 26 Chinese provinces. The U5 is already in production at a plant in land-locked Jiangxi Province, southern China. Think Arkansas.
>> TuSimple. Autonomous vehicle start-up for trucks steps into unicorn status with $95 million in Series D funding, led by the Sina Corporation, owners of Weibo, the twitter of China.
Take: TuSimple, with operations in San Diego and Tucson, is one of several Chinese auto-tech firms with dual operations in China and the United States. Others include Pony.ai, Roadstar, WeRide and Baidu.
>> Quadrobot/Detroit. This last-mile delivery firm aims to develop products in Detroit then manufacture and sell in China.
Take: China is proving to be a fertile ground for autonomous driving tech. National and local governments are paving the way into ports, airports and postal delivery services. Remember: China is home to more than 160 cities with a population of over 1 million residents. Each city has a transportation budget.
>> Didi/Chile: Didi is entering Chile, in many ways South America's most progressive economy and home to 18 million.
Take: Uber, watch your bottom flank. Didi is already well-ensconced in Brazil, after acquiring 99, a local company, in 2017. Now Didi is aiming to compete in Chile, Peru and Columbia.
>> Amazon/Automotive. Amazon invested $700 million last week in Rivian, the Michigan-based EV pickup and SUV maker. The deal comes just a week after Amazon’s “significant investment” in Aurora, the autonomous-vehicle startup.
Take: An internet giant investing in automakers? Shades of Tencent’s 2017 investments in NIO and Tesla.
>> Crunched. Apart from the TuSimple deal, Chinese investment into the United States is down significantly. Look at these Chinese-Investments-into-the-US numbers from the respected Rhodium Group:
2016: $46 billion
2017: $29 billion
2018: $4.8 billion
This does not mean business activity is grounding to a halt because the investment numbers do not count re-investments from current operations. Nor can they capture special deals like loans or licensing agreements designed to work around direct investment controls.
Nonetheless, investors are mostly holding their powder until trade and investment tensions ease.