Saturday, November 1, 2008

VW Profits Up 15%; China’s Automakers Also Doing Well

(First published in TheTruthAboutCars on October 31, 2008 )

VeeDub in Germany has just issued their numbers for the past nine months of 2008. Viewed through the prevailing “the world is coming to an end” perspective, VW’s financial results are financial pornography, performing better than the male lead in a Russ Meyer movie. We’re talking a 15 percent gain, a money shot of more than $6b pretax. From January to September 2008, VW moved 4.8m units and grabbed a 10.1 percent share of the world market, according to the usually reliable Automobilwoche [sub]. Despite of what’s happening elsewhere in the piston business, Volkswagen’s CFO Hans-Dieter Pötsch stands by his bullish guidance for 2008: the predicted numbers will ... come.

Elsewhere, China’s automakers have also released profit reports for the third quarter. From July to September, the 17 companies combined automotive revenues totaled 47.385b yuan ($6.93b), down a mere 2.9 percentage points from last year. Their net profits drooped to 747m yuan, down - oops - 62.4 percent year-on-year, laments the government’s news agency Xinhua via Gasgoo. Never mind. Profits aren’t a Chinese company’s main objective; they often leave that to their presence in Hong Kong, where taxes are low. The notable news: they ain’t losing money.
That said, China’s bad boys are from Detroit’s central casting: China’s former car giant Shanghai GM has completed only 54 percent of its 2008 sales goal. In a wise move, the joint venture reduced this year’s sales target of its Chevrolet brand by 25 percent. Likewise, big cheese Chinese automaker FAW reduced 2008 targets for its Magotan (think VW Passat B6 platform) to 70k units from the 90k target set in January. Which didn’t faze Wolfsburg one bit.

(Picture courtesy of Thank you!)

VW’s Martin Winterkorn To World: “Don’t Panic!”

(First published in TheTruthAboutCars on October 30, 2008 )

“Was uns nicht umbringt, macht uns härter.” What doesn't kill us, make us stronger. Martin Winterkorn may not have quoted Friedrick Nietzsche in his speech at the International Zulieferer Börse (IZB), related to us via Automobilwoche [sub]. But the CEO of Volkswagen’s theme was clear. “Don’t panic!” Winterkorn said (in German). VW will emerge from the crisis “stronger than ever.” Winterkorn pointed to growth markets such as China– which did little to calm suppliers’ fears (unless they were Chinese). “In China, 100 million people have a driver’s license,” VW’s capo di tutti capi said. Correct. “Only 10 million have a private car,” he added.

Wrong. Matter of fact, nobody really knows how many private cars there are in China. once had two numbers in the same article: “The total number of private cars in China jumps 32.5% to 15.22 million units by the end of 2007,” Gasgoo wrote. A paragraph later.. “35.34 million are private cars, an increase of 20.8% from one year earlier.” It’s easy to get confused in China. But if VW, China’s largest auto manufacturer doesn’t know the market’s size, who does? OK, now you can panic. [NB: the IZB is an ingenious cost-cutting measure of VW Purchasing whereby parts suppliers meet in Volkswagen's Autostadt-- and pay for the privilege.]

(Picture courtesy of . Thank you!)

China’s BYD EVs Headed to Europe. Then Stateside. Allegedly.

(First published in TheTruthAboutCars on October 29, 2008 )

While TTAC has Tesla on a Death Watch, aspiring Chinese EV-automaker BYD is getting massive street cred in The People’s Republic. In case you’ve got something called a life, BYD stands for “Build Your Dreams.” Since late September, “BYD” also stands for “Buffet’s Yankee Dollars.” Omaha’s Oracle liked the company so much he wrote a check for $230m for a 9.89 percent stake. [NB: Buffet knows the tax consequences lurking in a CFC-- and we're not talking chlorofluorocarbons.] Based in Shenzen, BYD is one of the world’s largest manufacturers of rechargeable batteries for cell phones. According to The New York Times, “the company also has a fast-growing auto-making unit that accounts for nearly a third of its revenue and makes fuel-efficient compact and subcompact cars for the Chinese market.” They have some bitchin hybrid and plug-in cars in the works with specs that scare the BYDickens out of the competition– if they’re half true.

Today's BYDispatches:

1.) Gasgoo reports that BYD is on course to sell 200k automotive units this year; double that next year. The F0 model (a clone of the Toyota Aygo/Citroen C1/Peugeot107) just made the Top Ten in China. The company will soon begin selling its first electric hybrid car in China, followed by an all-electric vehicle that could go 300 kilometers on a single full charge. [ED: or not.] The biggest break-through: fast-charging in 15 minutes to 80 percent capacity.

2.) Reuters reports that BYD has signed up 10 distributors for its plug-in hybrid car in Europe ahead of its targeted entry in 2010. Fleet buyers including Deutsche Post AG’s delivery arm DHL Express have indicated initial interest, or so BYD says. Henry Li, General Manager of BYD Auto’s export trade division is electrified by the news. “We’ll start selling in Europe before we get into the United States.”

3.) Motorauthority says that BYD hybrids and plug-ins will definitely be on sale in the U.S. in 2010, after BYD is done “talking to some third-party consulting and engineering companies to get a thorough understanding of the safety standards” in the U.S. Good thinking.

(Picture courtesy of Huffingtonpost. God knows where she got it from. Thank you all the same!)

They Are Starving In China - For Gas Guzzlers

(First published in TheTruthAboutCars on October 25, 2008 )

Last Thursday, the cargo ship CSCC Shanghai left Ventura County’s Port Hueneme with a load of near-extinct species bound for Shanghai, China: 2,100 GM big bore Buicks and Cadillacs. A lot of cargo space was also taken-up by gas-gulping Cadillac Escalades. China’s importing the American behemoths like they are going out of style (which, of course, they are). According to China’s General Administration of Customs, SUV imports from January to August surged a whopping 75 percent year-on-year, to 147k units. In fact, SUVs amount for half of the total imported vehicles.(Imported sedans only increased 17 percent.) Even higher gasoline prices and punitive taxes slapped on big displacement vehicles could not suppress China’s appetite for cubic inches. As far as GM’s concerned, China won’t go hungry. GM logistics specialist Don Asdell told the Associated Press that he’s looking at one or two boatloads a month for the Chinese market. Needless to say, there’s more (says so right there).

China will also import more foreign GM technology for domestic production and consumption. Gasgoo reports that GM will bolster its Chinese Buick line with European and American implants. Shanghai GM will use the Delta II platform (think Chevy Cruze) to make its new-generation Buick Excelle. Open source auto intelligence analysts scoured a new car model list recently released by China’s auto industry regulator. They found two new Shanghai GM models, code-named SGM7205 and SGM7241. Further prying revealed that these are longer-wheel based models of the Chinese Buick Regal and LaCrosse, made from the Epsilon II platform (a.k.a. Opel Insignia.) The new models are expected in China’s showrooms by year’s end.

Chinese Car Exports Retreat, Return Under Cover

(First published in TheTruthAboutCars on October 28, 2008 )

For the few past years, European and American automakers looked to Chinese carmakers with hope and trepidation. They hoped the booming Chinese market would lift their worldwide sales. It did. They feared the Chinese would export cars en masse, swamping Europe and the U.S. with cheap vehicles. They did not. For various reasons (crash tests, emissions, the economy), the arrival of the four-wheeled Yellow Peril was a non-starter. What little exports the Chinese managed went to second- or third-tier markets like Africa or South America. Even those are are going down, down, down. In August, China exported a mere 44,400 units, a decline of 22.18 percent month-on-month and 11.29 percent year-on-year. This according to numbers straight from the China Association of Automobile Manufacturers, quoted in Gasgoo, which calls the news “discouraging.”

Chinese companies who had Europe in their sights are holstering their guns. The German trade publication Autohaus reports that Chinese auto maker Geely is back-pedaling from prior announcements of an entry into the European market. With unusual candor, Jie Zhao, Vice President of the Zhejiang Geely Holding Group said: “Our products aren’t ready for the European market. We are realistic. We will not get ahead of ourselves.” According to Jie Zhao, they may reconsider a market entry “after 2010.”

Instead, Chinese exports are happening under cover. Under the cover of your car, to be exact. More and more parts in your American or European car are already made in China. Compared to 2002, exports of automotive products surged twentyfold to $41b last year. With cost cutting and job cutting being the mantra, this is just the beginning. Gasgoo reports that Daimler AG plans to increase its sourcing of automotive components from China nearly eight-fold within four years. The luxury car maker will buy $3.25b worth of car components per year in China, up from the $400m for this year. Will your next S-Class Merc be Made in China? Partly, at least.
(Picture courtesy Thank you!)

I'm sorry, won't happen again, really, I swear

I was so busy writing for TheTruthAboutCars, that irrenverent site in America that was crazy enough to hire me as their (cheap, as in Chinese cheap) Man-In-China that I neglected my own blog. Which was promptly noticed by my only reader, Jennifer, who, by the way works for Gasgoo. It is Gasgoo where I turn to first in the morning to get the latest on Chinese cars. If Gasgoo complains, BS wakes up!

To make up for my past sins, here is a selection of articles recently posted at TheTruthAboutCars. They are written for an American readership, so please pardon the puns.

German Stock Exchange To VW: “One More, And You’re Toast”

Reacting to the recent dervish dance of the VW stock, Germany’s stock exchange put their foot down hard. Any more funny business, and VW will be kicked out of the DAX, Germany’s equivalent to the Dow Jones. As of Monday, if a stock reflects more than 10 percent of the index, and if its volatility did exceeded more than 250 percent in the preceding month, that stock will be a goner as far as the DAX is concerned.

To put things into perspective: Last Tuesday, the weight of the VW stock in the DAX was 27 percent, and the 30 day volatility had redlined to 388 percent. If the new rules had applied, VW would long be evicted by now. Come Monday, VW will be represented in the index with 10% (Achtung!) and if there’s any more hip-hop like last week, then it’s “raus, raus, mach schnell!”

The German Exchange sugar coats the new rules as “preventative measures.” Not a lot of people are buying the carbohydrate. “I think, they are setting the stage for kicking VW out of the DAX,” quoth an expert, who’s name Automobilwoche, wisely did not want to reveal.

The Handelsblatt, not quite Germany’s equivalent to the WSJ, doesn’t rule out further yo-yoing of the VW share. Demand is high, supply is limited, and the hedgies are still loaded with borrowed stock. The new rules may actually induce volatility. “If VW goes above 10 percent of the DAX, we must sell,” said Marc Brubeck of Barclays Global Investors. Their index fund alone holds €2b worth of VW stock.

If VW is out of the DAX, the price is set to collapse, and Porsche will be able to buy whatever shares they want at fire sale prices. At the time of this typing, on Friday evening, at 5:38pm Frankfurt time, the VW stock was well behaved. It stood at €504.99, a mere €4.89 higher than its previous day’s close. Good boy! Now sit.

(Photo courtesy kruhme. Thank you!)

It’s A Truckedy: Volvo’s Rigs Poofed

You think car sales are bad? Try trucks. If you are anywhere close to the big rig truck business, take a Valium, aggression management counseling, or a gun before reading further.

European truck maker Volvo admitted to an aghast London Evening Standard that European sales for new Volvo rigs have gone up. Gone up in smoke, that is. Volvo’s truck sales evaporated by 99.7 percent. Yes, you read right. We repeat: Volvo’s truck sales are a mere 0.3 percent shadow of themselves. Volvo took orders for just 115 new trucks in the last three months. In the third quarter of 2007, Volvo sold 41,970.
Global orders for Volvo imploded by 55 percent in the last three months. Truck maker Scania said its Western Europe truck orders collapsed by 69 percent. (Tut-tut to London: The Evening Standard says that “Volvo has majority control” of Scania. Apparently, the news by-passed the Brits that in July, VeeDub had raised its voting stake in Scania to 68.6 percent. Which they probably deeply regret in Wolfsburg. )

Volvo also makes trucks under the Renault and Mack brands. Volvo is Europe’s second biggest truck maker, after Germany’s Daimler AG. No word from Stuttgart yet on their sales, or utter lack thereof. But as goes Volvo, so goes the neighborhood. Volvo’s car division had been sold to Ford in 1999. (Higher learning trivia: “Volvo” is Latin and means “I roll.” In post-Lehman English, it auto-antomized to “I roll over.”)

(Picture courtesy jwood. Thank you!)