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Jim Trippon is a certified genius, a member of MENSA, and the epitome of the “Overachieving Entrepreneur.” He’s an internationally renowned and globally experienced investment expert, dedicated to finding undervalued, “under the radar” investments for his worldwide clients and subscribers. He... More
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  • Mercedes Races Ahead of the Pack in China's Auto Boom 0 comments
    Apr 22, 2010 11:59 AM

    Mercedes-Benz Leads China's Fastest- Growing
    Premium Auto Industry

    Mercedes-Benz Leads China
    About: Mercedes-Benz, Volkswagen, General Motors, GM, Jim Trippon, China auto, Alix Partners, Wall Street Journal, Chinese stocks, CSI 300 Index, China Stock Digest, China Stock, Chinese stock, Chinese A-share markets, Shanghai Composite, Hang Seng China Enterprises Index Bookmark and Share

    Luxury brands are making enormous strides in China's booming auto market and Mercedes has just made the biggest impact of all. Mercedes-Benz became China's fastest-growing premium brand in the first quarter of the year with sales more than doubling from the same period in 2009.

    In another strong signal of China's robust economic growth, first-quarter deliveries of Mercedes-Benz autos in China surged 105% to 24,100 cars, and the company says it aims to sell a record-breaking 100,000 units in 2010. China has now become Mercedes-Benz's third-largest sales market, behind Germany and the U.S., which both experienced declining sales for the second year in a row as their economies continued to struggle. BMW plans to more than double the production capacity of its joint venture with Brilliance Auto, to 100,000 cars by 2012, more than double its current production and sales rate of 41,000 vehicles annually. The huge expansion of China's auto industry continued across all brands in March. China's total auto sales grew 55% year over year to about 1.74 million units during the month. March sales broke the record posted in January, when 1.66 million vehicles were sold. We are seeing an expansion of consumer demand, just as most economists have been hoping for, as China tries to rebalance its economy away from reliance on exports. First-quarter auto sales jumped 72% year over year to 4.61 million units. An ongoing government stimulus program was also given credit for the sales jump. Over the last five years, the average annual sales growth rate has been 22.6%.
    Mercedes Races Ahead of the Pack in China
    Some of the other brands making headlines this month are GM and Volkswagen. Volkswagen, Europe's largest automaker, said first-quarter profit almost doubled as sales in China jumped to new highs. China sales for VW climbed 61 percent to a record 457,300 vehicles. General Motors says it expects to sell more than 2 million cars in China this year. While still struggling in the United States, GM expects to sell more than 3 million vehicles annually in China by 2015. From an investment standpoint, we see the auto market as an excellent indicator of consumer sentiment but remain wary of investment in the sector due to razor-thin profit margins and an unusually vast field of competitors. Data from Alix Partners and the Wall Street Journal show that China's auto sector is highly fragmented, with the top 10 auto makers accounting for only 73% of sales. Compare that to the U.S. where Alix Partners reports that almost all sales, 94%, are among the top ten. With such fragmentation it's small wonder that Chinese stocks in the sector are hugely volatile and carry a high degree of risk.

    Disclosure: no positions
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