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Who will suffer most by slowing car sales?
After growing spectacularly on tax incentives for the past two years, China's auto market is quickly losing steam.
February sales of cars, MPVs and SUVs rose just 2.6 percent from a year earlier, according to the China Association of Automobile Manufacturers.
This is bad news for automakers. But for industry observers like me, slower auto sales will make it easier to tell which companies are poised to win or lose market share.
Right now, the big losers appear to be the domestic Chinese automakers, and the winners could be Germany's luxury brands. Here's why.
Incentives disappear
The central government this year ended its scrappage incentive and raised the sales tax on small cars to 10 percent, up from 7.5 percent.
The new policy hurt domestic Chinese brands, whose aggregate sales declined 4.3 percent in February. Within this group, the hardest hit were minivan makers. Last month, sales of minivans nationwide plunged 12.1 percent.
Since 2009, domestic brands like Changan and Chery have aggressively expanded minivan capacity and output. With sales now slumping, the minivan segment will be the first to face the risk of excess supply.
However, it is an ill wind that blows nobody good. Most automakers have yet to release their February sales figures. But some companies -- chiefly the luxury brands -- are bucking the slowdown.
Thanks to the increasing affluence of Chinese consumers, Mercedes-Benz sales surged 67 percent in February from a year earlier.
Mercedes and other luxury brands like Audi and BMW have been introducing "stretched" models to cater to wealthy Chinese consumers' taste for bigger sedans. This month, for example, Audi began sales of the stretched A8 in China.
So the German luxury brands are poised to gain market share.
But what about international automakers with mass-market brands? They are developing cheap models aimed at China's rural regions and smaller cities -- the domestic automakers' traditional turf.
A shakeout?
General Motors Co., for example, plans to introduce 20 new and upgraded models in China over the next two years. This will bolster a product lineup that already includes the Chevrolet New Sail, which has a starting price of 60,000 yuan ($9,090).
It will be interesting to see how domestic automakers respond. Amid deepening global economic woes in 2008, weak companies like Lifan and Southeast considered proposals to let bigger rivals buy them.
But after government tax incentives fueled a sales rebound in 2009, they quickly changed their mind and went back into an expansion mode.
Now that China's auto market has slowed again, I wouldn't be surprised if some of these companies start looking for buyers again.
February sales of cars, MPVs and SUVs rose just 2.6 percent from a year earlier, according to the China Association of Automobile Manufacturers.
This is bad news for automakers. But for industry observers like me, slower auto sales will make it easier to tell which companies are poised to win or lose market share.
Right now, the big losers appear to be the domestic Chinese automakers, and the winners could be Germany's luxury brands. Here's why.
Incentives disappear
The central government this year ended its scrappage incentive and raised the sales tax on small cars to 10 percent, up from 7.5 percent.
The new policy hurt domestic Chinese brands, whose aggregate sales declined 4.3 percent in February. Within this group, the hardest hit were minivan makers. Last month, sales of minivans nationwide plunged 12.1 percent.
Since 2009, domestic brands like Changan and Chery have aggressively expanded minivan capacity and output. With sales now slumping, the minivan segment will be the first to face the risk of excess supply.
However, it is an ill wind that blows nobody good. Most automakers have yet to release their February sales figures. But some companies -- chiefly the luxury brands -- are bucking the slowdown.
Thanks to the increasing affluence of Chinese consumers, Mercedes-Benz sales surged 67 percent in February from a year earlier.
Mercedes and other luxury brands like Audi and BMW have been introducing "stretched" models to cater to wealthy Chinese consumers' taste for bigger sedans. This month, for example, Audi began sales of the stretched A8 in China.
So the German luxury brands are poised to gain market share.
But what about international automakers with mass-market brands? They are developing cheap models aimed at China's rural regions and smaller cities -- the domestic automakers' traditional turf.
A shakeout?
General Motors Co., for example, plans to introduce 20 new and upgraded models in China over the next two years. This will bolster a product lineup that already includes the Chevrolet New Sail, which has a starting price of 60,000 yuan ($9,090).
It will be interesting to see how domestic automakers respond. Amid deepening global economic woes in 2008, weak companies like Lifan and Southeast considered proposals to let bigger rivals buy them.
But after government tax incentives fueled a sales rebound in 2009, they quickly changed their mind and went back into an expansion mode.
Now that China's auto market has slowed again, I wouldn't be surprised if some of these companies start looking for buyers again.