China Auto Sales Lag Guidance - Analyst Blog

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According to the China Association of Automobile Manufacturers (CAAM), vehicle sales in China grew 4.3% to 19.3 million units in 2012, including a 7.1% gain in December to 1.8 million units. Despite being higher than the 2011-level of 2.5%, sales growth is lower than the 8% growth projected by CAAM as well as the double-digit growth in 2009 and 2010.

The lower-than-expected growth can be attributable to a sluggish economy, rising fuel costs, weak Japanese automakers sales owing to a conflict between Beijing and Tokyo, and drastic steps take by few major cities to curb traffic congestion and emission levels.

Sales by Automakers

The U.S. automakers, including General Motors Company ( GM ) and Ford Motor Co. ( F ), performed quite well in China in 2012. GM posted an impressive 23.2% rise in sales to 242,486 vehicles, driven mainly by a hefty 41.7% gain in sales at its joint-venture with SAIC Motor Corp. For the full year, the company's sales grew 11.3% to 2.84 million units. Meanwhile, Ford sold 626,616 vehicles in the year, up 21% from 2011. The company's December sales surged 43% to 70,510 vehicles.

Sales of Japanese automakers lagged due to the above-mentioned conflict. Sales of Toyota Motor Corp. ( TM ) slid 4.9% to 840,000 vehicles in 2012, including a fall of 16% in December to 90,400 vehicles. However, the automaker is optimistic about 2013. It expects sales growth of 7% in 2013, which is higher than its global target of 2%.

Sales of Honda Motor Co. ( HMC ) dipped 3.1% to 598,577 vehicles in the year, including a significant 19.2% fall in December to 63,264 vehicles. Sales of Nissan Motor Co. ( NSANY ) slipped 5.3% to 1.18 million vehicles in the year. The automaker sold 90,400 vehicles in December.

Among the other automakers, Daimler AG ( DDAIF ) reported a 4% rise in sales to 206,150 vehicles in 2012. Meanwhile, Volkswagen AG ( VLKAY ) sold 2.81 million vehicles in the year, up 24.5% from 2011.

2013 Outlook

According to CAAM, auto sales in China are expected to rise 7% to more than 20 million vehicles in 2013, led by strong demand for passenger vehicles and economic recovery. The association believes sports utility vehicles (SUVs) will remain the fastest- growing segment in the year while commercial vehicles will record a moderate gain in sales.

China Versus U.S.

Auto sales in China had grown at a double-digit pace since 1999, except in 2008 when the global economic crisis crept in. In 2009, China overtook the U.S. as the biggest auto market in the world by sales volumes when the Beijing government introduced a stimulus package, including tax incentives for small cars. China accounted for a third of light vehicle sales growth in the last five years.

Auto sales in the U.S. grew 13.4% to the five-year high of 14.5 million vehicles in 2012 including a 9% rise to 1.4 million in December last year. A host of macroeconomic factors helped the industry reach the height. They include improving consumer confidence, falling unemployment and improvement in home sales and prices.

Sales were also fueled by strong pent-up demand, due to both aging vehicles (average age of a car reached 11 years) and the need to replace damaged vehicles from Hurricane Sandy. Banks were also friendlier as they offered greater access to loans with lower interest rates.



DAIMLER AG (DDAIF): Free Stock Analysis Report

FORD MOTOR CO (F): Free Stock Analysis Report

GENERAL MOTORS (GM): Free Stock Analysis Report

HONDA MOTOR (HMC): Free Stock Analysis Report

NISSAN ADR (NSANY): Free Stock Analysis Report

TOYOTA MOTOR CP (TM): Free Stock Analysis Report

(VLKAY): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DDAIF , F , GM , HMC , NSANY

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