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August 2, 2014

Opel Ogles Value Vehicles

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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Following the announcement by General Motors (GM) in December 2013 that it is withdrawing the Chevrolet brand from Europe, I commented back in December that this creates space for an affordable GM brand in Europe. This possibility is further supported by the fact that GM is seeking to move the Opel/Vauxhall brands upmarket with models such as the Cascada convertible, which seeks to target open versions of premium cars such as the Audi A5 and BMW 3-Series (or 4-Series as it is now known with the launch of the latest iteration). It is therefore with much interest that I read about Opel’s plans for budget vehicles but still wonder about GM’s brand strategy in Europe.

Defining value vehicles is rather subjective but the brands that I consider to qualify have seen their sales in West Europe soar by 68% between 2004 and 2013 and even by 35% since the car market peaked in 2007. To put this into perspective, demand for mainstream cars was 24% lower in 2013 than in 2007 and even the premium brands registered 14% fewer cars. With the European demise of Chevrolet expected by the end of 2015, this does leave an opportunity for GM to offer new vehicles to compete in the value segment.

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July 27, 2014

Euromonitor to Speak at 3rd ICIS European Butadiene & Derivatives Conference

ICIS_Logo_100HDate: 10th - 11th September 2014

Location: Westin Grand, Berlin

The Conference:
The 3rd ICIS European Butadiene & Derivatives Conference takes place in Westin Grand, Berlin this year on 10th and 11th September 2014. The 2013 edition attracted over 90 industry professionals from more than 64 companies representing 17 countries giving attendees the opportunity to network and learn simultaneously. This year, the conference will examine overcoming feedstock shortages, volatile market dynamics and reduced demand in an increasing global industry. Confirmed speakers include Versalis, Pirelli Tyre, Synthos, Euromonitor, Rubber Economy, Genomatica, Nexant, plus many more.

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July 22, 2014

National Automotive Industry Development Plan (NAIDP) Drives Car Sales to Record Levels in Nigeria

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

View Neil King's profile on LinkedIn

In October 2013, the Federal Government of Nigeria announced its National Automotive Industry Development Plan (NAIDP). In order to stimulate investment in local vehicle production and thereby bolster Nigeria’s economy instead of revenues heading abroad, a core component of the plan is an increase in import duties for passenger cars from 20% to 70% (35% duty and 35% levy) and to 35% for commercial vehicles. However, the duty applied to vehicles which are assembled locally is set at 10% for SKD (semi-knockdown) Part 2 kits, 5% for SKD Part 1 kits and 0% for CKD (complete knock-down) kits. Also, manufacturers that assemble vehicles locally can import up to twice as many FBU (fully built units) as they do kits at the reduced import duty rate of 35% for passenger cars and 20% for commercial vehicles.

The plan was fully implemented on July 1 and, not surprisingly, new car sales soared as consumers took advantage of the lower duty rates while they still could. The Executive Director of the Nigerian Automobile Manufacturers Association (NAMA), Mr Arthur Madueke, was quoted on July 8 on This Day Live that “between January and December 2013, about 52,000 new vehicles were imported, while by May this year, 37,000 cars have been imported.” With CBU imported vehicles paying the old rate of duty until the end of June, sales are likely to have boomed in the month and a 30% growth rate for the first half of 2014 is therefore not out of the question.

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July 6, 2014

EU-Japan Free Trade Deal: Influx of Japanese Imports Could Lead to Strategic Alliances

Justinas_LiuimaAnalyst Insight by Justinas Liuima - Industrial Analyst

The European Commission has expressed a will to continue negotiations with Japan with regard to a free trade agreement (FTA). However, the deal is facing strong opposition from European car producers due to fears of a price war, driven by an influx of Japanese imports. If a free trade agreement is reached, European producers could seek strategic alliances with their Japanese counterparts. 

Fear of Japanese Imports Leads to FTA Opposition

Despite the expressed political support from the European Commission, the European Automobile Manufacturer’s Association (ACEA) is opposed to a free trade agreement. The EU has consistently faced a trade deficit with Japan in terms of motor vehicles, with the value of imports reaching €9.1 billion in 2013 compared to exports worth €7.8 billion.

ACEA fears that an FTA would hinder business in its home market, particularly for volume producers in Italy and France. FTA would provide better positions for Japanese producers to leverage overcapacity and flood the European market with cheaper imports. This could spark a price war in the EU, which would be disastrous for car makers in France and Italy, which are already struggling with overcapacity and low profit margins.

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July 5, 2014

To Gain in the USA, Premium Carmakers Invest in Mexico

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

View Neil King's profile on LinkedIn

According to a Reuters news report on June 27, “Daimler AG and Nissan Motor Co are jointly investing $1.36 billion to develop premium small cars and build a factory in Mexico, the companies said on Friday, in a step that deepens cooperation between the Mercedes-Benz and Infiniti brands.” This was swiftly followed by a report on July 1, which stated that “Munich-based BMW said on Monday it would make an announcement in Mexico on July 3, all but confirming a widely expected decision to build a new factory to meet growing demand for premium cars, shortly after its rival Daimler announced similar plans.” Back in early 2012, before talk of the MINT economies, I identified Mexico as one of the MITE hotspots of future autos demand - along with Indonesia, Turkey and Egypt - and so these investment decisions hardly come as a surprise.

 

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June 21, 2014

Light Vehicle Sales in China Set to Double the USA in the Early 2020s

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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Whereas China will overtake the USA to become the world’s largest economy in purchasing power parity (PPP) terms this year, light vehicle sales in China already surpassed the USA in 2009. Admittedly, the recession means that light vehicle sales in the USA plummeted by 18% in 2008 and a further 21% drop in 2009 took the volume down to just 10.4 million units, whereas pre-crisis sales typically exceeded 16 million units. In contrast, however, light vehicle sales in China continued their ascent even throughout the global economic downturn and flew by the US with 12.6 million light vehicle sales in 2009. Moreover, sales climbed to 16.6 million units in 2010 and so China would have undoubtedly overtaken the USA even without the sales slump brought on by the global financial crisis. The key question then is why did China become the largest car market in the world years before it would become the largest economy and what does the future hold?

Light Vehicle Sales in China and the USA, 2005-2013

Source: Wards Auto

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June 14, 2014

Full-Size MPVs and SUVs Gain Momentum in China as Larger Households Rise Again

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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Back in September 2012, in the briefing "China’s One-Child Policy is Shaping a New Automotive Landscape", I discussed the fact that one natural side-effect of China’s one-child policy is a proliferation of smaller households. In fact, half of all homes are expected to have just one or two residents by 2020. Traditional three and even four-generation households are being replaced by singles, childless couples, and two-generation households in China’s growing urban landscapes. Social changes regarding marriage and the evolving role of women in modern China has allowed for much of this change. Young Chinese are moving out of the familial home upon graduation from university or college, often choosing to remain in the city in which they graduated, and concentrating on personal and career fulfilment before meeting the traditional requirements of the older generation. It comes as little surprise then that the number of households with six or more inhabitants halved between the late 1970s and the mid-1990s and that they accounted for just 6.5% of all Chinese homes in 2013. In this context, full-size MPVs have typically captured a negligible share of the new car market but this is changing.

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June 8, 2014

Pre-Crisis Attitude towards Debt in the US Translates into Pre-Crisis Light Vehicle Sales

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

View Neil King's profile on LinkedIn

When the US recession hit at the end of 2008, many analysts rightly pointed to the overzealous growth of consumer lending as one of the underlying causes. Banks and consumers alike were caught up in a positive feedback loop, too distracted by the easy money all around them to assess the extent that they were over-reaching financially. As asset prices started to plunge, it became apparent who could really afford what, and banks, eager to stem their losses, began to tighten their credit-based lending. Gross autos lending fell by 16% in 2008 and, similarly, light vehicle sales plummeted by 18%. However, gross auto lending experienced a CAGR recovery of 6% from 2010 to 2013 and light vehicle sales have rebounded with a 10% CAGR over the same period. Moreover, a pre-crisis attitude towards debt is helping to drive light vehicle sales back to pre-crisis levels already in 2014.

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May 15, 2014

Marchionne’s Latest Five Year Plan Rightfully Addresses the Core Problems at FiatChrysler (Part 2)

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

View Neil King's profile on LinkedIn

Further to my first piece which focused on FCA’s plans in Europe, the second problem that FCA’s new plan seeks to tackle is the group’s fundamental under-representation in key emerging markets, especially China. Although compact cars account for 1 in 4 passenger vehicle sales in China, competition is intense and FIAT arguably sits uncomfortably between domestic brands and numerous foreign players that are significantly more established in China. With neither the brand reputation nor an especially compelling product, it is little surprise that the locally-assembled Viaggio sedan did not meet sales expectations.

However, with the Chinese market set to grow to 30 million units by 2020, boosted especially by middle-income earners, and the boom in SUV sales in China, the resurgent Jeep brand surely provides a perfect platform for FCA in China and other key emerging markets such as India. Aside from credible products, Jeep does of course also have the brand heritage in China that FIAT lacks – bear in mind that the first Beijing Jeep rolled off the lines in China in 1985 but ultimately disappeared with the demise of DaimlerChrysler. A full return to China, i.e. not just as a niche import brand but as a fully-fledged local manufacturer is therefore long overdue for Jeep. Furthermore, the newly revealed Renegade compact SUV will also be produced in Italy and should successfully tap into the burgeoning demand for small SUVs across Europe.

Continue reading "Marchionne’s Latest Five Year Plan Rightfully Addresses the Core Problems at FiatChrysler (Part 2)" »

May 14, 2014

Marchionne’s Latest Five Year Plan Rightfully Addresses the Core Problems at FiatChrysler (Part 1)

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

View Neil King's profile on LinkedIn

On May 6, CEO Sergio Marchionne presented his latest five-year strategic plan for the newly unified FIAT Chrysler Automobiles NV (FCA). Investors have most certainly not embraced the plan and remain sceptical at best, with the stock price of FIAT SpA falling more than 11% as a result. However, at €7.54 (US$10.38) at the time of writing, this is still higher than at any point during 2012 and 2013 and is arguably more of a knee-jerk reaction to the group’s weaker-than-expected Q1 results which were actually only dragged into the red because of the US$491 million cost of acquiring the remainder of Chrysler. Moreover, I see the logic behind the plan and fundamentally support it as Marchionne attempts to address two core issues that are plaguing FCA; Europe’s squeezed middle and the group’s under-representation in key emerging markets. In this first piece of two, I discuss the situation in Europe.

Continue reading "Marchionne’s Latest Five Year Plan Rightfully Addresses the Core Problems at FiatChrysler (Part 1)" »

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Recent Posts

Opel Ogles Value Vehicles

Euromonitor to Speak at 3rd ICIS European Butadiene & Derivatives Conference

National Automotive Industry Development Plan (NAIDP) Drives Car Sales to Record Levels in Nigeria

EU-Japan Free Trade Deal: Influx of Japanese Imports Could Lead to Strategic Alliances

To Gain in the USA, Premium Carmakers Invest in Mexico

Light Vehicle Sales in China Set to Double the USA in the Early 2020s

Full-Size MPVs and SUVs Gain Momentum in China as Larger Households Rise Again

Pre-Crisis Attitude towards Debt in the US Translates into Pre-Crisis Light Vehicle Sales

Marchionne’s Latest Five Year Plan Rightfully Addresses the Core Problems at FiatChrysler (Part 2)

Marchionne’s Latest Five Year Plan Rightfully Addresses the Core Problems at FiatChrysler (Part 1)