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Automotive Sales in China: Winners and Losers

By Daniel Miller - Apr 16, 2016 at 8:00AM

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All automakers are happy to see sales in China rebounding in 2016 after watching them slow to a crawl last year. But that doesn't mean all automakers are posting heavy gains.

Ford's Focus ST. Image source: Ford Motor Company.

Last summer, when new vehicle sales in China slowed to a crawl, it would have been difficult to predict that a current issue would be lacking production capacity -- which I'm skeptical about, for the record.

"The companies are sticking to their growth plans for China," said Namrita Chow, a London-based analyst for IHS Automotive, when speaking with Automotive News. "Because demand is still growing in interior regions, if you don't have capacity, you can't sell there. That's the immediate problem."

While production capacity varies between major automakers, as an investor, I can tell you that everybody is happy to see sales moving higher in China, and sales are expected to rise 6% during 2016. With March sales data officially in the book, let's take a look at the winners and losers.

Ford Motor Company (F 2.64%) capped off a strong first quarter in China by selling 5% more vehicles last month than it did the year prior, up to 114,788 units. That 5% gain helped offset a weak February that took a big hit on sales volume because of the Chinese New Year. Through the first quarter, Ford's sales in China climbed 14%, compared to the prior year, to 314,454 units.

Driving Ford's sales gains last month and during the first quarter were the usual suspects: SUVs. Combined sales of Ford's Ecosport, Kuga (Escape), Edge, Explorer, and Everest nearly reached 80,000 units in the first quarter, a 38% increase compared to last year.

Another clear winner in China was Toyota Motor Corp. (TM 1.70%) which posted a sales gain of 41% during March to 100,500 units. While Toyota's gains in March looked outrageous, it wasn't a one-off wonder as its first-quarter sales were 28% higher than last year's results, totaling 291,000 units. Meanwhile, Honda Motor Co. (HMC 0.96%) managed to post a 15% gain to 97,004 units during March, and an 11% gain to 261,731 units during the first quarter.

Those three automakers thumped the industry average in China last month, which posted a sales gain of 7.8%, and a first-quarter rise of 6.8%. However, not all companies had such glaring success.

Calling General Motors (GM 1.70%) a loser in China really isn't fair, depending on how you look at it. Sure, GM and its joint ventures delivering 296,939 vehicles in March alone was a 0.6% decline from the prior year, but it still outsold most of the foreign automakers by a landslide. Looking at the first quarter, GM's deliveries increased 0.2% to a total of 963,652 units.

The good news for GM investors is that the automaker fully plans to take advantage of consumers' love affair with SUVs. About 40% of the new vehicles GM will launch in China over the next five years will be SUVs and MPVs. For context, between now and 2020, GM plans to unleash 60 new and refreshed models in China -- those launches should help GM's sales gains.

Another "loser" with a possible glass-half-full theme is Nissan. While the Japanese automaker's sales were up only 0.5% to 110,200 last month, it still held the top spot among its Japanese competitors for the first quarter. With 298,000 units sold during the first quarter, it outsold Toyota by roughly 7,000 units, and Honda by more than 36,000 units.

Going forward, investors will want to watch sales in China closely to understand if the slowing Chinese economy and increasing competition negatively impact automakers' business in the region. In fact, there's already evidence of some pricing pressure as 45% of dealers reported in a survey by the China Automobile Dealers Association that transaction prices declined in March as more discounting took place. That said, with three months of sales in the books, so far so good for investors of major automakers. 

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Ford Motor Company Stock Quote
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