GUANGZHOU, Nov 19 — Smoke and flashing lights, dancing girls in white go-go boots — the world’s top automakers put on dazzling shows as they wooed Chinese buyers with their latest models.
But for all the flash at this year’s Guangzhou Auto Show, automakers face a dimmer outlook for global sales, even here in the world’s second-largest vehicle market.
Just as General Motors Corporation and other manufacturers are desperately looking to emerging markets to compensate for falling sales in the US, Europe and Japan, potential car buyers in China, Russia and other once sizzling markets are pulling back.
With the economy slowing in China, people are worried about their pay and job security. News about the global financial crisis and plunging markets is also undermining consumer confidence.
“I was planning to buy a Lavida two months ago, but now have just changed my mind,” said Yang Hong, a senior manager for an audio equipment company in Shanghai, referring to a popular China-market model made by Volkswagen.
“It’s not that I can’t afford it, but I think it’s not so necessary, so I can wait until next year,” Yang said.
The big automakers’ ability to weather the crisis hinges on drawing jittery customers like Yang back into dealerships, especially in China.
The urgency is particularly acute for America’s big automakers — GM, Ford Motor Corporation and Chrysler LLC — which have been battered by the US economic meltdown and are lobbying the federal government for a US$25 billion (RM88 billion) bailout that looks increasingly murky. GM has said it could run out of cash by year’s end without government aid.
“We have to recognise that the US is where the problem is now. We’re growing in these other areas,” said Robert Socia, vice president of Shanghai General Motors, one of GM’s eight joint ventures in China. “The problems in the US are finite and are attributable only to the US, and a little bit to Europe.” Socia spoke on the sidelines of the Guangzhou Auto Show yesterday.
While the company’s worldwide sales fell 11 per cent in the third-quarter, many developing country markets were still growing at double-digit rates: 15.1 per cent in Russia, 15.5 per cent in Brazil, 12 per cent in China. India grew at a more modest 5 per cent.
Sales outside North America accounted for 61 per cent of GM’s total revenues in the third-quarter of this year, up from 56 per cent a year earlier.
Rival Ford Motor Corporation is likewise looking to China for growth — 30 per cent in 2007 — it can’t expect to find back home.
“We’re serious about this market. It’s becoming really big and influential,” said Nigel Harris, general manager for sales at Changan Ford Mazda Automobile Corporation, a Ford joint venture in China.
Ditto for German automaker Volkswagen AG, whose sales through its numerous units and joint ventures climbed nearly 13 per cent in January-October to 853,800.
China’s total auto sales rose 11 per cent in the first 10 months of this year. That’s robust compared with the contractions in the US, Europe and Japan, but nowhere near the 18.5 per cent increase seen last year.
Sales fell in August and September before gaining 8.37 per cent in October, as controls on credit hit large car sales, while high gas prices dented purchases of economy models.
“Definitely the market now is slowing down,” said Yale Zhang, a Shanghai-based analyst with CSM Worldwide. He expects sales growth to fall to single digits, perhaps 8 per cent, in 2008, for the first time this decade.
Other emerging markets are also getting hit. In Brazil, automakers are slashing production as sales plunge.
In Russia, which became Europe’s biggest car market this year, dealers reportedly were turning truckloads of vehicles away, saying they have no room for them. Passenger car sales rose 41 per cent in the first half of the year, to 1.65 million cars, but have tapered off since as banks cut off loans used to finance nearly half of purchases.
Sales of passenger vehicles in India fell by 9.1 per cent in October, while commercial vehicle sales plunged 36 per cent, as high interest rates and tight consumer credit took their toll on what had been one of the world’s fastest growing automobile markets, according to the Society of Indian Automobile Manufacturers, an industry group.
“We’re looking to emerging markets to grow and thrive in. We see tremendous potential as consumers will increase their purchasing power over time,” Maureen Kempston Darkes, president of GM’s Latin America, Africa and Middle East region, said in a phone interview from Miami.
Analysts say they expect sales to rebound in many markets once credit conditions loosen. China’s own economic growth — forecast to fall to as low as 7.5 per cent next year before it regains momentum— is vital.
GM itself has invested billions of dollars in China, helping push sales there to 1.03 million units in 2007 — a 12 per cent share in a viciously competitive market.
While it lobbies for a bailout from the US government, GM plans to carry on with its plans for China.
“China is very, very important to us when you talk about the emerging markets,” said GM’s Socia. “We’re expanding very, very fast here and we’re going to continue to do that.”
GM introduced three models new to China yesterday at Guangzhou. The first, the Buick Enclave, is a luxury SUV exported from the US as part of a trade agreement between Beijing and Washington.
The powerful Cadillac CTS-V, designed to compete with the world’s fastest sport sedans, is also US-made. The third vehicle, the Cruze, debuted last month at the Paris Auto Show and will be manufactured in Shanghai, among other worldwide locations, Socia said.
Japanese automakers Toyota Motor Corporation and Honda Motor Corporation both have thriving joint ventures here with local partner Guangzhou Automobile Corporation.
Sales may have fallen for now, but the market has huge potential for growth in the long-run, says Zhang of CSM in Shanghai.
“This is still the fastest growing large auto market in the world,” he said. “As a major player, if you want to have further growth in the future you have to invest in this market.” — AP
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