The main information comes from the National Passenger Vehicle Market Information Association daily news, etc.
National Passenger Vehicle Market Information Association website:
Overview of this week's car market:
1. In January, manufacturer sales increased by 15% compared to December.
Against the backdrop of relatively stable narrow-sense passenger vehicle manufacturer sales in December, manufacturer sales in January showed a high opening with a high starting point. Although the growth rate continues to decline, a good start is inevitable.
Under the trend of a booming market in December, it is inevitable that retail and manufacturer sales would reach new highs. However, manufacturers, considering the steady combination of annual sales, adopt a counter-cyclical regulation approach similar to the state's, resulting in December sales being close to November's.
This also caused super-booming sales at the beginning of January. In the first week of January, manufacturer sales grew by 61% compared to the first week of December 2010, and increased by 56% year-on-year compared to the same period in January 2010.
In the second week of January, manufacturer sales gradually declined as accumulated sales were gradually released but not yet completed. This week's sales increased by 22% year-on-year compared to the same period in January 2010, and grew by 8% compared to the same week in December 2010.
In the third week of January, manufacturer sales continued to decline as accumulated sales were gradually released and nearing completion. This week's sales increased by 20% year-on-year compared to the same period in January 2010, and grew by 6% compared to the same week in December 2010.
In the fourth week of January, manufacturer sales remained relatively stable, with some last month's data reflected. Due to some manufacturers already taking breaks or holidays at the end of the month, the final status will be announced after the Spring Festival, but the good start situation has been determined.
This year's January sales are similar to the numerical success of January 2010, but with greater force. Many manufacturers have already surpassed the level of December 2010, setting new highs. It is estimated that January manufacturer sales will grow by 15%-20% compared to December.
2. January market retail exceeds expectations
From the perspective of narrow-sense passenger vehicles, the policy characteristics of January this year are similar to those of January 2010, also being a recovery period for market retail after the policy withdrawal. Considering the super-booming market in December 2010 and the vacuum period in January due to Beijing's license plate restrictions, retail in January this year should have been very bleak. However, internal exchange suggests that retail started low but showed a clear upward trend. Although the recent trend of the low-end market dropped into a deep abyss compared to December 2010, especially with Beijing's self-owned brand retail only reaching 15% of December 2010 sales, the national mid-to-high-end model market performed well, better than our expectations.
This week marks the retail decline period before the Spring Festival car-buying rush, but still shows some growth compared to the pre-festival car-buying peak period at the end of January 2010. The market retail performance exceeded expectations.
3. Export growth needs to be maintained in 2011.
The import and export performance of the automobile industry in 2010 was severely imbalanced, and revitalizing the automobile industry remains a daunting task.
According to customs statistics, automobile exports in 2010 reached 566,653 units, a decrease of 17% compared to 681,008 units in 2008. Meanwhile, automobile imports in 2010 reached 813,345 units, an increase of 99% compared to 409,769 units in 2008.
From January to December 2010, cumulative imports of complete vehicles (including chassis) reached 813,345 units, a year-on-year increase of 93%, marking the highest period of explosive import growth in nearly ten years. The quarterly trend of automobile imports in 2010 continued to climb, reaching a peak of 220,000 units in the fourth quarter.
Following the significant decline in automobile export growth in 2008, this year's export growth was not as fast as between 2004-2007, and there has been no substantial breakthrough in automobile exports after the crisis. From January to December this year, exports increased by 53% year-on-year compared to January to December 2009, but decreased by 17% compared to January to December 2008, meaning that exports from January to December this year have not yet recovered to the level of exports from January to December 2008.
With the high growth of China's imported cars, we have enormous tax revenue and good international relations. However, the development of automobile exports lags far behind the overall development level of export trade and falls short of the country's expectations for automobile exports. In the context of adjustments in the domestic automobile industry in 2011, more support is needed for automobile exports to improve the passive situation of automobile exports.
4. Pressure on the real estate market control on the car market
A new round of real estate control measures has been introduced, including pilot property tax programs in Chongqing and Shanghai, adjustments by the State Taxation Administration to business taxes on property transactions, and measures such as purchase restrictions and loan restrictions. We believe this is related to the recent rise in the real estate market, particularly the rapid increase in housing prices in some second and third-tier cities, indicating that the current stage policies have low tolerance for further increases in housing prices. In the short term, the adjustment of housing prices and real estate transactions will have a mild impact on the overall macroeconomy. The impact on the car market will also be small.
Affected by inflation expectations, the middle class in third-tier cities is still striving to turn every coin and available loans into real estate. Although this home-buying group is relatively small, the pressure on savings funds is increasing, putting these groups under greater pressure to buy cars. Moreover, looking at the trends over the next few months, the complex changes in CPI, interest rates, housing prices, wages, and exchange rates will create uncertainties for the car market.
5. Financial pressure on the future car market
There is certain pressure on both real estate control and car market growth. Based on comprehensive judgments, it is predicted that the CPI inflation rate in January will hit a new high, rising to around 5.5%, exerting enormous pressure on interest rate hikes. Accelerated anti-inflation policies will come at a cost to exports and growth in 2011. February is a crucial period for dealers to replenish inventory, but recent controls on credit issuance have created significant financial pressures for restocking passenger vehicles. There are signs that banks' actual lending rates are rising relative to benchmark rates. Additionally, the pressure to further raise benchmark rates is increasing, inevitably raising dealers' operating costs.
The "Jasmine Revolution" which erupted in Tunisia in mid-December 2010 and escalated to Jordan and Egypt added new risks to the global economy. The deeper reasons for the Jasmine Revolution include high inflation and unemployment economically, and political corruption and authoritarianism. The political stability of the Middle East and the entire Arab region is threatened. This has led to increased market risk aversion, potentially driving up oil prices and making inflation a global issue. This will significantly impact the rise in gasoline prices in China, creating an unfavorable environment for the car market after the Spring Festival.
6. New Year, New Spirit
2011 has truly arrived; this is a new starting point for the car market. Our policy and market analysis starts with the New Year's Day as the beginning of the new year, while the market considers the Spring Festival as the new beginning.
A year full of challenges and opportunities begins!
Borrowing from last year’s qualitative evaluation, the market in 2011 will face severe uncertainty. Although the current market is slightly better than expected, risks still exist.
Personally, I believe that Mr. Rao Da's prediction of negative growth is highly noteworthy and alarming. After all, the market will undergo drastic changes after the policy exit. As industry insiders, we clearly understand that wholesale sales do not represent market trends, as they result from significant subjective operations. The pressure of the market will quickly manifest after the Spring Festival.
We also recognize clearly that the pressure lies at the end of the year, meaning continuous risk accumulation. Excessive optimism and hoping for a savior at the end of the year again is unrealistic. The market in the fourth quarter will be very challenging.
Even more severe is the sharp reduction in profits. Profit is the middle part between cost and market price. Last year's market was good, resulting in large intermediate profits. However, this year's market faces immense pressure, and the intermediate profit will first rapidly shrink. Hoping for low growth in sales and stable growth in profits is highly unrealistic.
However, we still believe that the popularization of private cars in China is still in its early stages. 2011 is an adjustment period following the high growth in the Dragon and Tiger years, and the concluding adjustment period of the three-year revitalization plan. The future prospects of the Chinese automobile market are bright, with promising economic returns.
As the Spring Festival approaches: Wishing all friends in the automotive circle a prosperous Rabbit Year, riding on Chi Tu, Happy to have you!
I. New Products and Price Reductions
Happy New Year, market ceasefire.
II. Macroeconomic Environment and Policy Information
1. China's inflation may spiral out of control.
On January 27, renowned American economist Nouriel Roubini warned during the World Economic Forum Annual Meeting in Davos that China's inflation might lead to overheating of the economy. Meanwhile, the latest quarterly report by McKinsey & Company stated that the rise in China's food prices is structural and could threaten growth.
For economic elites attending the annual meeting in Davos, Switzerland, China's inflation, America's high unemployment rate, and Europe's sovereign debt crisis are their greatest concerns, although they all indicated that the world economy will continue to recover in 2011.
According to American media, Professor Nouriel Roubini of New York University, who accurately predicted this round of the economic crisis, said in an interview with CNN during the Davos conference that the Chinese government has not taken enough measures to control credit growth, and real estate bubbles are forming in both civilian and commercial sectors in China.
Analysis: China's inflation will not spiral out of control, just higher. The pessimistic view of China abroad will not materialize, but the pressures and challenges facing China this year are not insignificant.
2. Central Bank: Continue to use interest rate and quantity tools for regulation.
The People's Bank of China's "Monetary Policy Implementation Report for the Fourth Quarter of 2010," released on January 30, 2011, stated that in the next phase, the central bank will continue to use tools such as interest rates, reserve requirement ratios, open market operations, as well as differentiated reserve requirements dynamically adjusted to complement conventional monetary policy tools. Greater importance will be placed on measuring the support of finance to the real economy from the perspective of total social financing. Interest rate liberalization reform and RMB exchange rate formation mechanism reform will steadily proceed.
The PBOC set the expected growth target for broad money supply (M2) in 2010 at around 17%. By the end of 2010, M2 actually grew by 19.7%. The report forecasts that M2 will grow by approximately 16% in 2011.
The report shows that real estate loans increased by 2 trillion yuan in 2010, an additional increase of 17 billion yuan year-on-year. However, looking at monthly data, the additional increase was concentrated in the first five months, with seven consecutive months from June to December showing less year-on-year growth. In December alone, real estate loans increased by 74.6 billion yuan, a decrease of 114.8 billion yuan year-on-year.
Analysis: Mortgage growth in 2011 will likely be difficult, given the significant pressure from interest rates. Loans in other areas should gradually loosen.
3. "Three Rounds of Regulation Arrive" - The "New Eight Measures" Intensify Crackdown on Speculative Housing.
Premier Wen Jiabao presided over a State Council executive meeting on January 26 to study and deploy further work on real estate market regulation. The meeting determined eight measures (referred to as the "New Eight Measures"), including strengthening differentiated housing credit policies, strictly managing housing land supply, adjusting and improving relevant tax policies, etc. Among them, for families purchasing a second home with a loan, the down payment ratio must be no less than 60%, and the loan interest rate must be no less than 1.1 times the benchmark interest rate. Personal transfer of housing business tax policy will be adjusted, and for personal housing purchased within five years and resold, taxes will be levied uniformly based on the full sales revenue.
Analysis: As long as the government is determined and local governments implement effectively, housing prices are destined to rationally return.
4. Property Tax Levied in Shanghai and Chongqing, Nationwide Promotion to Follow Appropriately.
The Shanghai Municipal People's Government issued on January 27 the "Interim Measures for the Pilot Program of Levying Property Tax on Some Individual Residences in Shanghai." According to the measures, starting from January 28, property tax will be levied on newly purchased second homes and above for Shanghai resident families and newly purchased homes for non-Shanghai resident families. The tax rate will be temporarily set at 0.6% and 0.4% depending on house prices. The measures specify a deduction of 60 square meters per capita of tax-free housing area (housing floor area) for Shanghai resident families. That is, for newly purchased homes that belong to the second home and above, if the total family housing area per capita does not exceed 60 square meters (including 60 square meters), the newly purchased home will be temporarily exempt from property tax; if it exceeds 60 square meters, the area exceeding the newly purchased home will be taxed according to regulations.
Chongqing, as a pilot for the personal housing property tax reform, began levying property tax on personal properties starting from January 28. Mayor Huang Qifan of Chongqing Municipality stated that standalone villas, newly purchased high-end commodities, and second homes purchased by outsiders in Chongqing will be subject to property tax, with rates ranging from 0.5% to 1.2%.
Analysis: In the short term, property tax can serve as a deterrent to soaring real estate prices. However, in the long run, the main factors affecting real estate prices lie in supply and demand relationships and market expectations. Curbing high housing prices cannot rely solely on the immediate effectiveness of property tax.
5. Guangzhou Traffic Congestion Control Plan Revised: No Restrictions on Private Vehicles
On January 8, the initial draft of Guangzhou's traffic congestion control plan encountered criticism for being "hollow" and "mild," with clauses restricting foreign vehicles and the increase of official vehicles becoming focal points of controversy. After revision, the highlights include limiting the increase of official vehicles and not restricting the registration of new vehicles. This congestion control plan proposes that Guangzhou will further strengthen the management of official vehicles. By 2015, all levels of party and government agencies and fully funded public institutions in Guangzhou will not add new official vehicle quotas. According to our understanding, the number of official vehicles in Guangzhou is close to 200,000, accounting for 9% of the city's total number of motor vehicles (2.145 million) and 12% of the total number of small cars in Guangzhou.
Regarding the number of new vehicle registrations, the plan does not impose restrictive regulations. Limiting foreign vehicles may affect business and trade exchanges between Guangzhou and surrounding cities. After research, the measure of restricting foreign vehicles has been temporarily canceled in the plan.
This plan proposes that Guangzhou will study and argue the feasibility of implementing traffic congestion fees in some key congested areas of the city. Guangzhou will soon initiate research, including the scope, time periods, standards, and forms of collecting congestion fees.
Analysis: Other cities have fewer means and greater difficulty in restricting private vehicles than Beijing, so economic measures are more reasonable and easier to implement.
III. New Car Information
1. BAIC's First C-Class Car Powered by Saab Engine Expected to Launch by the End of the Year
BAIC's first C-class high-end sedan has completed its R&D work and is expected to be launched in the market by the end of this year or the beginning of next year.
This BAIC's first C-class sedan is coded as C70G and is developed based on the Saab 9-5 platform, representing the first high-end sedan developed from this platform. Detailed parameters of the power unit have not yet been revealed, but it is confirmed that the new car will be equipped with a Saab engine. According to reports, this engine is the first 100% domestically produced and independently developed "Beijing" brand engine, and the development work on this engine has been completed.
Analysis: Establishing a brand requires a certain cycle and robust quality; the domestic production of high-end car engines should lag behind the whole vehicle.
IV. Corporate Dynamics
1. Compromise Under the Name of Autonomous Brand Development - FAW-Volkswagen Plant in Foshan to Start Construction This Year
Recently, Matthias Mueller, President and CEO of Volkswagen Group (China), publicly stated that "Volkswagen plans to develop a brand exclusively for the Chinese market and is currently negotiating with its Chinese partners. The new brand cars will be priced below 8,000 euros." Mueller also mentioned that the Chinese government has required for some time the launch of a brand aimed at the Chinese market. Under this situation, all joint ventures of foreign-funded companies in China, including FAW-Volkswagen and SAIC-Volkswagen, have been required to develop brands targeting the Chinese market. Volkswagen's compromise seems to have made the Foshan plant project see light at the end of the tunnel. According to informed sources, Volkswagen's Foshan plant will definitely participate in the joint venture's own-brand project, which is the critical factor for the project's breakthrough.
Analysis: Developing an independent brand for joint ventures is the key to sustainable development.
2. Youngman Automobile Receives Approval for Sedan Production
On January 25, the National Development and Reform Commission approved Zhejiang Jinhua Youngman Automobile Manufacturing Co., Ltd.'s application to cross categories and commence passenger car production projects. The Youngman passenger car project will be located in the Jiangdong Industrial Park of Hangzhou Xiaoshan Economic and Technological Development Zone and Jinhua City Economic and Technological Development Zone. It will produce sedans and multi-purpose passenger cars under the Youngman brand, with an annual capacity reaching 100,000 units, including 90,000 sedans and 10,000 multi-purpose passenger cars. The Jinhua base will produce Lotus L6 series passenger cars, with a planned investment of 2 billion yuan and covering an area of 1,000 mu. The first phase project will invest 1.2 billion yuan, aiming to complete construction and start operation by 2012; the second phase project is scheduled to begin construction in 2012 and complete by 2013, reaching production capacity of 50,000 units by 2014. It is expected that after reaching full production, annual sales revenue will increase by 5.8 billion yuan. The long-term goal is to achieve an annual production capacity of 200,000 units and a production value of 40 billion yuan.
Analysis: Under the background of controlling overcapacity and adjusting industrial structure, the threshold for approving sedan production is getting higher. The approval of the Jinhua Youngman passenger car project benefits from the support for independent brands and small-displacement sedans.
3. Lifan Invests 3.5 Billion Yuan to Build a New Auto Base
On January 26, Lifan Holding Group signed an agreement with Liangjiang New Area to invest 3.5 billion yuan in constructing a new passenger car production base. The base is located in the Longxing Industrial Park of the "One Trillion Auto City" in Liangjiang New Area and is expected to be completed within two and a half years. The base will layout the production of 200,000 mid-to-high-end sedans annually, 50,000 new energy vehicles, and 300,000 auto engines. After completion, it will realize an annual output value of 25 billion yuan, pay 6 billion yuan in taxes, and provide 10,000 job opportunities locally.
Analysis: After the listing of Lifan's stocks, the construction of the new factory has become easier. Lifan excels in innovation and should have new development opportunities.
4. Geely Jingang with London Badge to Launch Post-Year
After the introduction of Geely's London, Global Hawk, and Emgrand brands, models under each brand have undergone certain adjustments. Previously, many models bearing the Geely badge were transferred to the London brand. Recently, it was learned that the existing Geely models Jin Gang and Jin Ying will be replaced with the new London badge. The sales channels for Jin Gang and Jin Ying will remain unchanged. Starting from January 2011, the rebranded Jin Gang, Jin Ying, and Jin Ying CROSS models have begun arriving at dealerships.
Analysis: For Geely, last year was an extraordinary one. Not only because of its groundbreaking acquisition of Volvo, but also due to the improvement in Geely's own brand strategy and product layout. In the past year, the product lines and future development architecture of Geely's three new major brands - Global Hawk, Emgrand, and London - have been largely established. Geely's multi-brand strategy will help comprehensively cover target customers. Furthermore, three brands positioned sequentially, each forming its own system, will enhance Geely's brand image. In 2011, joint ventures promoting their own brands will usher in a new wave, posing a certain threat to indigenous brands. For Geely, the pressure is considerable. 2010 was an important strategic transformation year, and starting this year, the building of channels and products under the new brand will be further deepened.
5. Expansion Project of JAC Passenger Vehicle Base Officially Kicks Off
It was recently learned from inside JAC Motors that the much-anticipated expansion project of the passenger vehicle base has officially commenced. The total investment is expected to be 2.19 billion yuan, with a planned investment of 770 million yuan this year. The first production line is expected to be put into use as early as the second half of this year. The entire project is expected to be completed and put into operation by the end of 2012, with an estimated annual output value of 15.34 billion yuan upon full production.
An insider revealed that JAC Motors may soon plan to raise capital through a public rights issue to address the funding needs for the expansion of passenger car production capacity, but the specific amount of financing is still unclear.
Analysis: JAC's capacity expansion and stock issuance are beneficial for increasing share capital to cope with restructuring.
V. Industry Dynamics
1. Establishment of