• Tue
  • Jul 29, 2014
  • Updated: 2:13pm
BusinessChina Business
ANALYSIS

Carmakers seen heading into bumpy half

New products and upgraded models key to beating market competition, industry told

PUBLISHED : Monday, 02 September, 2013, 12:00am
UPDATED : Monday, 02 September, 2013, 4:28am

Mainland carmakers may have cruised home in the first half but a bumpy ride lies ahead as they struggle to weather a slowdown in sales.

Over the past three weeks, the carmakers have mostly reported profits that beat market expectations, yet the outlook for the rest of the year remains uncertain.

The sales of major players, such as Geely Automobile and Great Wall Motor, were better than expected, but a slowdown was likely in the second half, said Eva Yip, an analyst with Sun Hung Kai Financial.

But Dongfeng Motor, a partner of Japanese car brands Nissan and Honda, underperformed its rivals because of the impact brought by the dispute over the sovereignty of the Diaoyu islands, Yip said.

"A price war is likely in the rest of this year as competition intensifies. The question is whether it will be a mild or vicious competition," she said.

Great Wall Motor saw its sales outperform those of its rivals. Its sales rose 41.3. per cent to 370,301 units in the first six months of the year from a year ago.

Robust sales of the company's SUV models Haval series H6 and M4 recorded significant growth, said Orient Securities analyst Jiang Xueqing in a research note. Jiang expects Great Wall Motor's SUV sales to continue to grow when upgraded H6 models and two more new models under the Haval series are launched.

However, the operating environment remained challenging, she said.

"Economic slowdown will have impact on demand, and reduction in product prices will affect the company's profitability," she said.

According to the latest survey by international business advisory firm AlixPartners, mainland car sales are expected to grow 7.2 per cent this year while growth would slow to 6.3 per cent in the next two years, and drop further to 5.4 per cent in 2016 and 2017.

The survey polled 100 senior domestic and foreign executives from the industry.

Ivo Naumann, the managing director of AlixPartners, said some big players would lose market share amid rising competition as sales slowed.

Those that could boost market share with high-end products would be able to outperform rivals, Naumann said.

Geely's purchase of Swedish carmaker Volvo in 2010 allowed it to position itself well, he said. "It gives [Geely] access to more volume, and also a second brand at the higher-end market."

SAIC Motor had been doing very well in gaining market share by developing new products and good dealerships, Naumann said.

SAIC, the mainland's largest carmaker by sales and a partner of General Motors and Volkswagen, posted 15.3 per cent growth in sales to 2.57 million units. It also reported a 6 per cent rise in first-half profit.

"The ability to launch new products is also important as carmakers which can gain more market share are likely to be the winners amid rising competition," Yip said.

She said Geely would be outperformed in the race for market share.

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