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!)

D’oh: China Feels The Pain

Despite unmitigated appetite for anything that has wheels, the Middle Kingdom is no longer immune to the world’s motor malaise. Steelguru.com is an Indian website that tracks the steel market and that has a professional interest in anything that stamps and grinds that metal. They got ahold of Cheng Xiaodong, who is (get ready for this) “Head of the vehicle price monitoring arm of the National Development and Reform Commission” of China. That head opined that the Chinese auto industry is ripe for a big consolidation. That unsuspected revelation prompted Huang Zherui, analyst at CSM Asia in Shanghai, to likewise gaze in his crystal ball: "In a downturn, only strong players can survive, local carmakers may be hit the most by slowing demand as buyers of their vehicles have less purchasing power than motorists opting for higher end products." Wow. Who would have thought that?

No need to increase your sodium pentothal to see the truth: China’s Top Ten carmakers (SAIC, FAW Group, Dongfeng, Chang'an Automobile, Beijing Automotive, Guangzhou Automobile, Chery Automobile, Brilliance, Hafei Motor, and JAC) hold a combined share of 84% of China’s still chugging along car market. This according to Gasgoo, who analyzed new data released by the China Association of Automobile Manufactures (CAAM.)

At last count, China sported 52 brands, obscenely more than any other country on this planet. Some more may have been missed in the count. With 42 makes fighting for the crumbs that fall off the Big Ten’s tables, Mr. Cheng can be 99% sure of the consolidation he predicts, and his government desires.

Even China’s Big Ten feel the pain:
- A higher sales tax on big cars caused sales of big displacement luxury cars drop by more than 50 percent, Xinhua reported.

- FAW’s third quarter net profits are down 4 percent, says Reuters via Gasgoo.

- Ford is slashing output at Changan Ford Mazda, a ménage à trois between Ford, Japan's Mazda Motor Corp and Changan Automobile Co .

- China’s car export numbers are “discouraging” says Gasgoo.

Unfazed by groundless pessimism, China’s State Information Center still forecasts that the country’s auto output and sales will grow by 10%. In a (by Chinese standards) rare expression of “what have you guys been smoking” Gasgoo comments: “It is a phenomenon if China’s auto market can maintain a growth rate by 10% this year amid a global auto market downturn.”

China’s New Deal: Next Time, Try The Train

China decided to drop some serious money on digging the country out of a hole. We’re not talking namby-pamby bailout money for distressed banks and auto companies that may actually go up in price (yeah, sure.) We’re talking real hard asset investment. China’s State Council has approved $300 billion for large scale construction projects to seriously boost economic growth, China Daily reported.

Everybody had been banking on concrete measures to expand China’s clogged roads. But to the abject horror of China’s motorists, the government’s money will be working on the railroad.

"In 1997, we dealt with the Asian financial crisis by stimulating domestic economic growth by investing in the construction of highways.” Zheng Xinli, a senior government policy advisor, said. “This time the money will go on improving the rail network." Using the CIA Factbook's numbers, 1/10th of GDP will be railroaded through China’s economy.

As New Haven, Connecticut, woke up to the Sunday news, shit-eating grins dominated the breakfast tables: This February, Yale University’s college endowment fund had sunk $50 million in the IPO of the China Railway Construction Corp., which is set to get about half of the pie. That deal should keep Yale well endowed.

Of the $300 billion, $180 billion have already been allocated; the rest should be earmarked and spent in no time flat. By 2010, China wants to expand its 48,000-or-so miles of rail by another 8,000 miles. That, my fellow Americans, would be the distance from Anchorage, Alaska, all the way to Peru. And they’ll have that done in 2 years. Right of way? No problem: All land belongs to the government.

I Told You So: Beijing's Car Sales Going Through The Roof

In a previous missive, I predicted that Beijing's car curbs might actually increase sales. Just as it did in Nigeria 30 years ago. I didn't think it would happen so fast. This is what is posted today in TheTruthAboutCars.com, which just hired me as cheap Chinese labor:

Beijing’s 30% New Car Sales Surge Explained
By Bertel Schmitt October 24, 2008

“Brakes come off auto sales” the semi-official, English-writing Chinese newspaper China Daily headlines today. “Beijing car sales, which account for about a tenth of the national tally, are surging this month after the end of Olympic traffic controls and because of rumors about new caps on vehicle numbers, ” reports the newspaper, citing the head of China’s largest car dealer. Beijing Asian Games Village Automobile Exchange, an 80k unit megadealer in China’s capital, has seen sales increases of 30 percent this month, and there’s still another week to go.

Beijing’s buyers are stampeding back to the showrooms, after half of the cars had been banned from Beijing’s streets during the Olympics. Following the Olympics, a Kafkaesque car ban on Beijing’s byways and highways was instated, driving demand for second cars. Or for two cars at a time. Rumors that Beijing’s city government could limit new vehicle registrations to 100k a year, about a third of the city’s average annual vehicle sales, also unleashed a storming of the showrooms.

“We don’t know how the rumor started or whether it’s true, but it’s certainly working in terms of boosting sales,” said Su Hui, General Manager of the megadealer.

So far, the only city in China which rations vehicle ownership is Shanghai, a.k.a. Gridlock-City. In Shanghai, each month 5k to 6k license plates are auctioned off. Shanghai plates are fetching higher prices than small cars. According to the official news agency Xinhua, the average price of a Shanghai plate is 47,711 yuan ($6253),. Chery’s QQ subcompact, one of China’s Top Ten sellers, goes for 39,800 yuan. Shanghai’s scheme hasn’t done more than boosting the city’s budget: Motorists simply register in other towns.

If America runs out of ideas of how to jump-start the auto business, maybe they could rip that page from China’s playbook. Or not.

Now I've Got Heartaches By The Numbers

Troubles by the score

A few months ago, sitting in a conference of respected (excluding me) Chinese auto journalists, I said: “How many car companies are there really in China? I hear two numbers. 60 and 120. What’s the real number?” They all shrugged their shoulders. As long as 20 years ago, auto makers prophecied that the world would have space for maybe 10 car companies max. Now in China, we can't keep track of them.

How many cars in China? Likewise a mystery. You’ll read numbers between 20 million and 150 million. Most of this is a lack of systems. They simply can’t track yet. Some is lost in translation. The fine nuances of “vehicles,” “motor vehicles,” “cars,” “passenger cars,” “private automobiles” easily turn into roadkill - especially when the translator makes only $200 a month and rides a bicycle to work.

The number I trust this week is 60-some million vehicles-with-more-than-two-wheels in China. That includes some 15 million three-wheelers and low-speed delivery contraptions.

Every day you love me less, each day I love you more

How many private cars? Last February, gasgoo.com had two numbers in the same article: “February 29 (Gasgoo.com) - The total number of private cars in China jumps 32.5% to 15.22 million units by the end of 2007, according to Chinese government statistics released yesterday.” And, in the next paragraph: “By the end of last year, total number of vehicles on roads of China has reached 56.97 million units… Of these vehicles, 35.34 million are private cars.” Shen me? (Polite Chinese for "WTF?")

But the day that I stop countin', that's the day my world will end

Here is another nice one from last year: “Sources from China’s Public Security Ministry said that the recorded number of vehicles in use in China is 150 million in the first half of 2007, of which 53.558 million are autos and 83.548 million are motorcycles.” Hmmm … and the other 12.9 million? Rollerblades?

Be it as it may, China has 1.3 billion people (or 1.5, or 1.6 - nobody knows for sure) The G7 average is 610 cars per thousand people. The US tops the list with 740 cars per 1000 men, women, babies, convicts, and near-dead. (No wonder the market stalls when 3-garage homes go into foreclosure - it’s lack of public parking!)

Using the internationally accepted number of a market nearing saturation with 500 cars per thousand inhabitants, China has room for 650 million cars! Or 750 million. What the heck, a few hundred million more or less don’t matter.