China Mess, Yuan Devaluation Spread to the US
China’s auto market, which had been the single most important element in the convoluted growth story of GM and other global automakers, was getting battered even before the yuan devaluation. But now elements coagulate into a toxic mix.
Sales of passenger vehicles in July dropped 6.6% from a year ago, to 1.27 million, according to the China Association of Automobile Manufacturers, a 17-month low, after they’d already fallen 3.4% in June, and after they’d relentlessly trended down since late last year.
This debacle happened even though automakers had cut prices and heaped incentives on the market to stem the decline. GM and VW started it, and it has now turned into a price war.
GM’s sales through its joint ventures fell 4% in July year-over-year, to 229,175 vehicles. Despite falling sales and ballooning price cuts, GM remains, at least in its press release, optimistic about sales and profit margins in China, its second largest market, and simply blamed “model changeovers and the phasing out of older Chevrolet vehicles.” So no biggie.
Ford’s sales through its Chinese joint ventures plunged 6% year-over-year, its third monthly decline in a row, to 77,100 vehicles. Unlike GM, it’s publically worried:
“Longer term, we’re still very bullish on China,” Hau Thai-Tang, head of Ford’s global purchasing, told an industry conference in New York. But the company would move to lower output in China if there is a “prolonged period of recessions.”
While some automakers booked gains, like Daimler whose sales surged 42%, others got clobbered, like Nissan whose sales plunged 14%. And VW said today that its Audi sales in July had plummeted 12.5% in China, Audi’s largest market. It sells about a third of its cars there.
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