GM's Biggest Growth Market Is Now China 11 comments
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Since the days when Henry Ford set up his first factory, the United States of America has been the single largest market for automobiles in the world. With America facing a deep recession, US auto sales have fallen by as much as 37% this past month compared to year ago numbers resulting in the US, for the first time, losing its position as the world's number one car market. For the month of January, more cars were sold in China than in the United States. Japan's auto market ranks third in size behind the US and China.
In part that's due to the Chinese government cutting the tax rate on new car purchases, previously at 10%, in half. Although still lower than China's January 2008 sales totals, January 2009 saw relatively strong auto sales performance once the tax cut was announced. The Associated Press reports that General Motors (GM) expects Chinese auto sales for all of 2009 to eclipse US sales by more than a million vehicles. If those numbers prove accurate, it is not likely that the US will ever regain the lead since the market penetration of automobiles in China is still very small.
China, of course, has a total population that is more than four times greater than the population of the US and has been executing a long term economic policy encouraging domestic consumption. China would like to rely less on its foreign exports for its continued economic growth and more on its own domestic markets. Yet its auto industry is still largely reliant on technology borrowed from western companies. General Motors has invested heavily in China and sold over a million vehicles in that country in 2008. The Chinese government is, however, intent upon developing its own auto technology infrastructure and is committing billions of Yuan toward technology modernization efforts in the industry this year.
China has also made huge investments in roads and highways in its major industrial areas in the last decade and modern highways, even by US standards, now lay waiting for increased traffic. A visit to the industrial areas in the countries south, however, finds a mish mash of old and new, with overloaded bicycles and scooters weaving in and out between compact cars, large trucks, and stripped down tractors as the agrarian economy gives way to industry.
Stock position: None.
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This article has 11 comments:
The Big 3 have virtually eliminated the American supplier over the past ten years and now they wonder why their growth is in the country where the supplier jobs went?
That's it mega-corporations and government, keep firing your best customers. Third world country here we come!
Read these quotes very carefully:
"In part that's due to the Chinese government cutting the tax rate on new car purchases, previously at 10%, in half."
"China would like to rely less on its foreign exports for its continued economic growth and more on its own domestic markets."
"The Chinese government is, however, intent upon developing its own auto technology infrastructure and is committing billions of Yuan toward technology modernization efforts in the industry this year."
Starting to get the drift here? The government in China has made a huge commitment to a strong automotive industry. Why? Because they know that a strong auto industry, and manufacturing in general, bring with them a long and powerful value added stream that feeds the economy in numerous ways.
Our government, and America in general, is indifferent to the manufacturing sector and is content with moving the same money from one person to another. In the future, if you think that a country full of Starbucks, brokers, and retailers can compete with a country that manufactures things such as China, Korea, India, and Mexico, you're sadly mistaken.
If you tour the University of Michigan's graduate program in manufacturing, you would be hard pressed to find a caucasian face, all Asians. Even the Dean is Chinese and splits his time between Ann Arbor and Shanghai.
By the way Philly Jim:
""Yet its auto industry is still largely reliant on technology borrowed from western companies."
If you had been in China and understand that the one thing they still need is our technology, you wouldn't say:
"GM is unloading all of their junk on America and offering up state-of-the-art technology in their drivetrains being sold in China." Simply not true. The difference is that the Chinese value GM products and, ironically, Americans like yourself don't.
Perhaps making up a statement like this makes you feel good. Too bad there isn't a shred of fact to be found anywhere to support it.
The fact that the big three were so successful for so long has worked against them in the long run. Every group that sees a way to extract something ($ mostly) from the US industry has systematically done so.
Other world governments see the benefit of having and being supportive of their industrial/manufacturi... base. The federal government and states have worked continually to make it more costly for US based automakers to compete, while at the same time granting incentives to importers.
It continues to amaze me how much glee people take in celebrating the troubles this industry is having. A lot of good jobs still remain in the US and can be saved. Because of these desperate times, we may be able to get the number of plants, pay, and staffing levels in line with market demand. It has taken this kind of a near-death situation to get concessions from from all quarters.
Americans should be pro-America and stop cheering for it's demise!
It's time to take care of our selfs...BUY AMERICAN BY AMERICAN!
BRING OUR JOBS BACK IT'S THE ONLY SOLUTION!
I would have to disagree with one statement in your comment.
Our government is hardly indifferent, as you say, to our nation's manufacturing sector. In fact, it does its best to PUNISH it.
To begin we have one of the highest corporate tax rates in the world. As regards domestic vehicle manufacture, we tax, mandate, and regulate the daylights out of it every step of the way. The Detroit 3 and their unions (which don't help any either) are but the fall guys here.
Now we've managed to compound this dilemma by electing an unabashedly anti-business, pro-tax government to run our country. They don't believe we tax and regulate production ENOUGH, so it's obvious what the eventual results will be.
Stingray made the comment that our problem is we were too successful for too long. How right that is! As the famed economist Schumpeter put it, "Profit is a penalty."
Not until we take a hard look at how the BRIC's (China and Brazil in particular) have developed their economic miracles which have lifted hundreds of millions of their citizens out of abject poverty and emulate them do we stand any chance of a real recovery.
I'll give you a clue. It all begins with CHEAP domestically produced energy. Without that, NO country in the history of the world has been successful economically. The good news is we have more than virtually every nation in the world (including the Arabs). The bad news is our government BOYCOTTS virtually all of it (in favor of unproven radical energy schemes).
The worst news is this isn't going to change overnight. We're going to have to become significantly poorer before we decide to alter our profligate ways and become truly competitive again one day.