SHANGHAI: Global car makers flock to the Shanghai Auto Show this week with the world’s largest vehicle market facing an unfamiliar sales slump just as China veers toward an ultra-competitive electric future.
Fuelled by rising incomes and government sales incentives, China has been the golden goose upon which the global automotive industry has staked its future.
But after years of strong growth, car sales fell last year for the first time since the 1990s, hit by a slowing economy, US trade tension, and a Chinese crackdown on shady credit practices that has crimped car-financing channels.
Sales dipped 2.8 percent in 2018 to 28.1 million units, according to that China Association of Automobile Manufacturers (CAAM), a pace that has accelerated in recent months.
“This is the first time since the takeoff of the Chinese market that there has been such a long and sharp decline in sales,” said Laurent Petizon, an auto analyst at Alix Partners.
“We are starting to worry a little bit. It’s a new phenomenon.”
The decline is magnified by a prior buying rush as consumers moved to beat the government’s recent removal of tax rebates for small car purchases.
Major carmakers still see solid potential, particularly in bright spots such as SUVs and electric vehicles, which will account for many of the new models on display in Shanghai.
But cut-throat competition is expected to intensify even in EVs with Beijing moving to phase out policies that encourage the purchase of “green” vehicles.
This mixed picture — optimism combined with worrying new realities — is reflected in the plans of carmakers like Ford.
The US manufacturer this month announced plans to launch 30 new models in China within three years, a dozen electric.
But it also unveiled a strategy to cater more directly to the evolving needs of Chinese car buyers.
This includes incorporating the artificial intelligence technology of China’s Baidu into Ford vehicles, giving Ford’s Chinese joint ventures more freedom on design choices, and other steps.
Although China is the world’s largest “new energy” vehicle market and sales soared 62 percent last year, they remain a drop in the China bucket with 1.3 million units sold, thanks in part to purchasing incentives.
But they represent the future for China, especially with the government planning to impose quotes requiring carmakers to maintain a certain percentage of new energy vehicles in their Chinese production.
This has given rise to a number of Chinese EV start-ups seeking to stake out territory that will have to face off against the likes of Tesla.
The California automaker, widely seen as the EV standard-setter, is putting more eggs in China’s basket.
Tesla chief Elon Musk broke ground in January on a factory in Shanghai — the company’s biggest overseas move yet.
The new plant will eventually have an annual production capacity of 500,000 vehicles, dramatically increasing Tesla’s output.
Foreshadowing further competition, Beijing has vowed to open its market, removing a requirement that foreign manufacturers form manufacturing joint ventures with Chinese partners.
Tesla’s planned factory is believed to be the first to take advantage of this.
Regardless of short-term jockeying for position, China will remain a crucial market, particularly in electrics, said Ferdinand Dudenhoeffer, director of the Germany-based Center of Automotive Research.
“The situation will slowly improve. Next year, the market will recover little by little and in three to four years, will have resumed its earlier growth,” he said.
IMF Executive Board approves FY2020–2022 Medium-Term Budget
ISLAMABAD: The Executive Board of the International Monetary Fund (IMF) has approved the fund’s administrative and capital budgets for financial year (FY) 2020, beginning on May 1, 2019.
According to IMF press statement received here Tuesday, the board had approved the budget on April 5, 2019 besides taking note of indicative budgets for FY2021–22.
The net administrative budget for FY2020, which covers all administrative expenses less receipts (primarily from external sources to help support capacity building activities and excluding lending income), has been set at US$1,158 million, it said.
The FY2020 budget represents an unchanged resource envelope in real terms for the eighth year in a row, measured relative to the IMF’s budget deflator, with the exception of a small (0.6 percent) increase in FY2017 to meet rising cyber and physical security costs.
The budget priorities for FY2020 include increased resources to country work, notably in low-income countries and fragile states, the work on governance and the fight against corruption, and macro-financial surveillance.
Asian markets cautious ahead of major corporate earnings
HONG KONG: Stocks were generally lower in Asian trade on Tuesday as investors move cautiously ahead of a deluge of corporate results later in the week.
Tokyo stocks were trading down with profit-taking before 10 days of holidays in Japan weighing on the market.
With many markets opening after an extended Easter break, Hong Kong Shanghai, Taiwan, Singapore were all down, while Australia and Seoul were trading up.
“Some of the world’s biggest technology companies are reporting earnings this week as well as a raft of the big European banks,” Nick Twidale, chief operating officer at Rakuten Securities Australia, said in a note to clients.
“Investors will be hoping for some better-than-expected results from both groups to keep the topside momentum in global equities, however if the data starts to show a significant slowing across these key industries then expect both stocks and risk trades to start to come under some heavy pressure.”
Major earnings releases expected this week include Amazon, Facebook, Microsoft, Exxon Mobil and auto maker Tesla.
Aerospace giant Boeing will report earnings on Wednesday for the first time since a deadly March 10 plane crash plunged the company into crisis-mode.
Financial analysts have already slashed their 2019 profit forecasts after Boeing announced earlier in April it was cutting its monthly production of the 737 by about 20 percent. Lower plane deliveries directly affect revenues.
Traders are also looking ahead to the first-quarter gross GDP data due Friday in the US.
Macron all set to announce reforms to contain Yellow Vest protests!
PARIS: French President Emmanuel Macron will reveal his long-awaited response today (at 6 pm) to Yellow Vest manifestations in a reform plan that could prove decisive for his presidency and long-term political future.
Macron, 41, swept to power in 2017 on hopes he would be a youthful breath of fresh air for France. But since November he saw the momentum sucked out of his presidency by the weekly “yellow vest” protests against social inequality.
He is scheduled to hold a Presser in order to announce a series of reforms drawn up after a vast listening exercise he launched in response to the protests.
Macron is expected to announce reforms such as tax cuts for middle classes, as well as the abolition of the ENA administration school. He is expecting that such reforms, which could not be termed as revolutionary, would assuage the unrest.