How the Big Automakers Are Faring in China

Recently released China auto sales numbers spell out very different scenarios for some of the top automakers. GM, on one hand, continues to do well in the country. Sales for China's best-selling automaker rose 7.9% in the first two months of the year. 

That wasn't the case for all automakers, though. Three of the big Japanese automakers -- Toyota, Honda, and Nissan -- all experienced market share decreases for the first two months of the year in China. A main reason for this is the continuing territorial dispute between Japan and China which has led to increasing anti-Japanese sentiment in China. 

In the video below, analyst Brendan Byrnes explains why the China auto market is unique for these automakers, and which are on track to continue to do well in the country. 

Andrew: Hey Fools, Andrew Tonner here. I'm joined today by Brendan Byrnes, our industrials analyst for Fool.com.

Brendan, let's take a look at one of the biggest drivers of the auto market, China. Specifically, the recent developments of GM in China. When you look at this story line, what's going on?

Brendan: GM continues to do very well in China. Over the first two months, January and February, increased sales by 7.9% versus last year.

What's interesting to see is the big Japanese auto makers -- Toyota, Honda, Nissan -- all had market share decreases. The reason for that is the continued fallout over this territorial dispute that they're having with China right now.

Investors of those companies, and of GM and Ford, need to keep an eye on that and how that's going to affect them down the road, because right now there's some anti-Japanese sentiment in China, which is not a good thing for those companies when you're talking about the biggest auto market in the world now.

We don't know Ford's February numbers yet, but we know they're coming off a great January in which they doubled their sales from the year before. They sold about 60,000 cars in January. GM sold about 310,000 cars in January in China, so clearly about one-fifth as many cars for Ford, but that also creates opportunity.

They're pumping $5 billion into Asia, building all sorts of factories. They want to become a big player here, and I really like their plan.

Getting back to GM, pretty solid with Buick, Cadillac down about 24% overall the first couple of months. There are reasons for that, but GM is clearly going to have to execute better with their goal of making Cadillac a major brand in the country by 2015.

It's important to note with Asia that not all sales are created equal, in terms of profit. You have to have joint ventures, which takes about half the profit, so clearly you're not getting the kinds of margins, but again when you're talking about the world's biggest auto market this is one that none of these auto makers can afford to miss out on.

That's why I really like the domestic auto makers' position right now, especially with what's happening with the big Japanese auto makers.

We should mention that Volkswagen is right up there with GM, fighting it out for the market share lead. They're definitely one to watch as well, as they try to take over the "World's Largest Automaker" crown in a few years.

Overall, I think this bodes well for the big domestic automakers. I'm a shareholder of them. They remain my favorite picks in this sector, just because they're so cheap right now and I still think they have room to run, even internationally. 

It's true that decades of mismanagement of General Motors led to a painful bankruptcy in 2009, but it emerged a leaner, stronger company. GM's turnaround, however, is still a work in progress. Investors around the world are wondering if GM has what it takes to reclaim its former glory. John Rosevear has put together a brand-new premium research report telling you what you need to know about GM and its turnaround. If you own or are thinking about owning GM, then you don't want to miss this report. Click here now to get started.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2310928, ~/Articles/ArticleHandler.aspx, 10/20/2014 8:46:22 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement