American Cars Have the Right-of-Way in China

China is the world's largest automobile market, and GM  (NYSE: GM  ) , Ford (NYSE: F  ) , and Toyota (NYSE: TM  )  are three of its biggest players. Let's see which of the three is gaining ground, and which is faltering.

GM speaks fluent Chinese
GM arrived in China in 1995, and introduced the Cadillac there in 2004. It now controls 15.6% of the market, according to LMC Automotive.

GM sells a variety of vehicles in China, but it's best known for its luxury models -- especially Buick. GM reports that Buick deliveries in China jumped 26% in July over the previous month, with Cadillac sales up an impressive 83% over the same period. 

Total sales this year, according to the automaker, are up 11%, which it says puts the company in excellent position to reach its goal of 3 million vehicles sold by the end of the year. 

And when the Chinese think of status, they think of Buick. The last emperor owned a Buick, and so did the country's first provisional president. A 2011 New York Times article (http://www.nytimes.com/2011/11/15/business/global/in-china-car-brands-evoke-an-unexpected-set-of-stereotypes.html) highlighted how the stereotype of stodginess that has dogged Buick in America doesn't exist in China. To own a Buick there means that you have arrived.

Nixon, I mean, Ford in China
Ford and Toyota have a running dispute over whose small car -- Ford's Focus or Toyota's Corolla-- leads the world in sales. However, there's no dispute that when it comes to sales in China, Ford's Focus definitely outsells Corolla. Ford says that its overall sales volume in China is now only second to its sales volume in the U.S. In fact, Ford sold more Focus models in China in 2012 than in any other market.

According to LMC, Ford, thanks to its Focus, had captured 2.5% of the Chinese market by 2012. That same year, the China Association of Automobile Manufacturers named the Focus the No. 1-selling vehicle in China.

Not bad for a latecomer: Ford didn't arrive in China until 2001.

There is no rising sun in China
And how is Toyota doing in China? Toyota's overall sales in China, while still larger than Ford's, are falling.

An increase in anti-Japanese sentiment is partly to blame. The Chinese and Japanese have a long history of animosity, and lingering bad feelings resulting from last year's disputes over territories in the China Sea have made matters worse, with some Chinese protestors issuing calls for boycotts of Japanese products.

LMC predicts that by 2017, Toyota's share of China's car sales will be at only 3.6%, down from last year's 4.4%. 

Looking ahead

For investors, it appears that both GM and Ford have arrived in China. J. D. Power & Associates even says that Buick sales in China could reach 1 million by 2016. 

The fact that GM and Ford are American companies cannot be overestimated. They both represent a glamorized America -- the America of freedom and upward mobility. When the Chinese buy a Buick, they're not just buying an automobile. They're buying their own carpeted, temperature-controlled outpost of the new world. 

Meanwhile, Toyota isn't given the same halo treatment in China because the history between the Chinese and the Japanese isn't going away. And the more China begins to exert influence in the region, the more pushback it's going to receive from Asia's previous economic powerhouse, which in turn could increase animosity and anti-Japanese sentiment on the part of the Chinese.

The Chinese automobile market is a buyer's market. Expect the consumer to avoid the car that comes loaded down with historical and political baggage in favor of the iconic American image on wheels.


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

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: 2722240, ~/Articles/ArticleHandler.aspx, 10/25/2014 12:59:36 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