Ford Motor Co.'s George Pipas, sales analysis manager for the U.S., estimated that the industry's total sales, including medium and heavy-duty trucks, dropped by 42% last month , the February yearly change, vs. February 2008, totaling about 690,000 units. No surprisingly, the car sales drops confirm that the U.S. Contraction is Accelerating.
However, after overtaking the United States in January auto sales for the first time, China extended its lead as the world's largest auto market in the second straight month this year.
China's February auto sales figure is very impressive. It seems that the new incentives are really having an impact on the market. The policies introduced earlier this year include the scrapping of some road fees and halving of sales taxes on small vehicles.
http://adage.com/article?article_id=135014
Thursday, March 19, 2009
Financial crisis creates new opportunity for GM
On Feb, o6 2009 General Motors Corp., which is currently surviving on U.S. government loans at home, is in expansion mode in China, holding talks with state-owned auto maker FAW Group Corp., on a possible new joint venture to make light commercial vehicles. At the end of February, the president of GM China Investment Co. Ltd., Kevin E Wale officially visited the Governor of Heilongjiang province Li Zhanshu.
Mar,19 2009, It is reported that the FAW Harbin Light Duty Truck Factory will serve as the major part of the joint venture in the light commercial vehicle cooperation project between GM and FAW. This has always been a global ongoing process in the auto industry. However, Before this project, GM only has joint partner with Shanghai auto parts manufacture Co.
The current worldwide financial downturn generates conditions that provide opportunities for stronger entities to consolidate the weaker ones. China, as an emerging market, seems not affect by the global financial crisis, the auto industry still keep growing. The truck segment's sales of GM is the only one can generate profits for GM. With steps in the Chinese light truck segment, GM would utilize and combine its technology with intensive Chinese labor to find a new market for truck sales.
Canadians: Drive 8 of BMW 3 series cars for free !
The BMW 3 series is one of the most fun cars to drive. If you live in Vancouver, Toronto and Montreal, you may be eligible to register for a free drive event. It is an exclusive event where you and your friend can drive the entire BMW 3 series line-up of premium sports and Sedans for up to two hours and compare them against the competitors from Lexus, Audi and Mercedes.BMW will select Canadian registrants to drive BMW 3. The purpose, obviously, is to sell more BMWs through the real experience by the drivers. The company will be benefit by having the drivers insight about the cars, also, spreading out the driving experiences among the followers.
Event Calendar
Vancouver: April 17-19
Toronto: May 29-31 and June 5-7
Montreal: May 8-10
More information, including registration information, can be found on the BMW site.
Tuesday, March 17, 2009
Recent Downturn’s impact on China’s Auto Aftermarket
Let us take a snap shot about China’s automotive component parts market first:
* Fragmentation: up to now, we have 2300 component makers scattered in 31 provinces. Only 6 of them have the turnover about 1 Billion US$. 10 of them have 80% of the total market sales and the rest of 2300 share the other 20%. This fragmentation leads to a obvious weakness: cost disadvantage due to lack of economies of scale.
* Revenue streams: Until recently, most Chinese auto parts manufacturers focused exclusively on local OEMs and Export business. Why? Because the aftermarket was seen as too small and in China the sector is bedeviled by knock-off parts.
Due to the recent down turn, revenues from local OEMs and Export business are shrinking in an unprecedented speed. In a foreseeable future, the outlook is also not optimistic. We foresee the following changes to happen in next two years:
* Faster-than-expected industry consolidation due to the financial difficulties caused by this global downturn
* More suppliers will turn to the Aftermarket for new source of revenues due to
* Rapidly expanding car parc
* Strong sales of small cars, which have a higher demand for accessories
* The emergence of the used car market
* Improve quality and reliability of distribution channels
For more detailed and reliable information and analysis, please also refer to the KPMG official web sit www.kpmg.com
Sunday, March 15, 2009
What is the next generation distribution model for China’s Automotive Aftermarket?
In late 80’s, to cope with the demand of completed and in-time supply of spare parts, entrepreneurs in China developed a distribution model for aftermarket---Spare Parts City. Through sharing the assets and market knowledge, they found a way to cope with the shortage of resources, such as money for huge inventory, customer base, product knowledge, and research development for new products.
However, since the beginning of 21st century, demand side of aftermarket is under continuous changes. New modernized passenger cars are changing the structure of the growing car parc. The growing middle class is changing the profile of car owners. The old distribution model, the supply side of the market, met the unsatisfied demands recently: not transparent prices, counterfeit parts, not good enough service……
Those challenges are calling for a whole new business model which can transform the distribution of spare parts. We believe US’s specialized franchise model suits the current China’s market. In US aftermarket, 4-S system only occupies 20% of the distribution business. The rest of the business is occupied by franchise such as AutoZone, NAPA, etc. Most of the franchises are specialized in one or two product groups to form their own competitive edge, such as Engine Repair, Brake System Repair, etc.
For more detailed data and argument, please refer to the following website:
http://auto.gasgoo.com/News/2009/02/12093657365754066232_3.shtml
However, since the beginning of 21st century, demand side of aftermarket is under continuous changes. New modernized passenger cars are changing the structure of the growing car parc. The growing middle class is changing the profile of car owners. The old distribution model, the supply side of the market, met the unsatisfied demands recently: not transparent prices, counterfeit parts, not good enough service……
Those challenges are calling for a whole new business model which can transform the distribution of spare parts. We believe US’s specialized franchise model suits the current China’s market. In US aftermarket, 4-S system only occupies 20% of the distribution business. The rest of the business is occupied by franchise such as AutoZone, NAPA, etc. Most of the franchises are specialized in one or two product groups to form their own competitive edge, such as Engine Repair, Brake System Repair, etc.
For more detailed data and argument, please refer to the following website:
http://auto.gasgoo.com/News/2009/02/12093657365754066232_3.shtml
Thursday, March 12, 2009
Bird-eye View of China’s Aftermarket in Coming Years
Enough has been said about the individual car model trends in the next 2-5 years. Now let us take a bird-eye view of China’s aftermarket to see what opportunities and challenges are there for us.
China’s aftermarket Demand for light vehicle parts is projected to increase at an annual rate of 13.8 percent, reaching to around 4.9 billion US dollar in 2009. We expect dramatic levels of growth in the coming years, driven by the extremely high growth rate of light vehicle sales since 2005. The expanding car-parc, coupled with private ownership of new vehicles at more than 70 percent today, supports strong growth in the parts and service market.
To be more specific, with more modernized vehicles joining the market, China’s rapidly expanding light vehicle park is experiencing a structural change, providing additional aftermarket parts sales opportunities due to high vehicle content levels and the introduction of new emissions control technologies.
However, opportunities always come with challenges. Potential barriers to continued aftermarket parts revenue growth include China's lack of a functioning used car market with appropriate market-based pricing mechanisms, which hinders demand for replacement parts for used vehicle refurbishment. Furthermore, rampant aftermarket parts counterfeiting could limit growth in the legitimate parts aftermarket going forward, causing intense levels of price competition.
I attached some data to support my argument. For more trends and information, please also refer to http://www.jdpower.com/corporate/china. I found it very useful for updated information.
AUTOMOTIVE AFTERMARKET IN CHINA
(million Chinese yuan) %Annual Growth
Item 1999 2004 2009 04/99 09/04
China Auto Aftermarket 9100 21000 40000 18.2 13.8
Mechanical 4530 10440 19800 18.2 13.7
Electrical 1810 3980 7240 17.1 12.7
Electronic 1080 2810 6000 21.1 16.4
Exterior & Structural 1680 3770 6960 17.5 13.0
China’s aftermarket Demand for light vehicle parts is projected to increase at an annual rate of 13.8 percent, reaching to around 4.9 billion US dollar in 2009. We expect dramatic levels of growth in the coming years, driven by the extremely high growth rate of light vehicle sales since 2005. The expanding car-parc, coupled with private ownership of new vehicles at more than 70 percent today, supports strong growth in the parts and service market.
To be more specific, with more modernized vehicles joining the market, China’s rapidly expanding light vehicle park is experiencing a structural change, providing additional aftermarket parts sales opportunities due to high vehicle content levels and the introduction of new emissions control technologies.
However, opportunities always come with challenges. Potential barriers to continued aftermarket parts revenue growth include China's lack of a functioning used car market with appropriate market-based pricing mechanisms, which hinders demand for replacement parts for used vehicle refurbishment. Furthermore, rampant aftermarket parts counterfeiting could limit growth in the legitimate parts aftermarket going forward, causing intense levels of price competition.
I attached some data to support my argument. For more trends and information, please also refer to http://www.jdpower.com/corporate/china. I found it very useful for updated information.
AUTOMOTIVE AFTERMARKET IN CHINA
(million Chinese yuan) %Annual Growth
Item 1999 2004 2009 04/99 09/04
China Auto Aftermarket 9100 21000 40000 18.2 13.8
Mechanical 4530 10440 19800 18.2 13.7
Electrical 1810 3980 7240 17.1 12.7
Electronic 1080 2810 6000 21.1 16.4
Exterior & Structural 1680 3770 6960 17.5 13.0
Thursday, March 5, 2009
Dual Clutch Transmission--- the next new hot thing in China’s Automotive Market
In the last 20 years, China’s auto industry was acquiring technologies steadily through forming joint venturing and buying product lines. However, until now, China doesn’t have a mature manufacturing base for Automatic Transmissions.
Things are changing now. In the second decade of the 21st centaury, China decides to skip the Automatic Transmission stage, directly deploying next generation technology--- DCT, to its fast growing auto industry. This new gear box is smaller and lighter that traditional automatic gear box, offering benefits such as better driving experience and better fuel economy to drivers. In next 2 years, you will see VW, Borg Warner, Getrag, and China owned Qing Shang launching their own Dual Clutch Transmissions. The full capacity invested will be around 1.5 million boxes per year.
Among all the DCTs which will be launched in China, VW’s DQ200 will be the star. This new seven-speed gearbox adopts a pair of dry, organic bonded friction linings that do not require cooling, making the drive-train more efficient through the extra ratio and the fact that less power is required for the gear selection and clutch servo system. Since the clutch does not require cooling the quantity of oil was reduced from 7-litres in the six-speed DSG gearbox to only 1.7-litres in the new seven-speed system. Measuring only 369 mm in length and weighing only 79 kg including the dual-mass flywheel the gearbox is remarkably compact.
The adoption of DCT technology will make China’s car industry much “Greener” and more energy efficient. The spare part distributor should pay attention to this new trend, adding new product lines to the inventory to meet the future demands.
Details for DCT please refer to the following link http://www.vw.com.cn/cds/?menu_uid=787
Things are changing now. In the second decade of the 21st centaury, China decides to skip the Automatic Transmission stage, directly deploying next generation technology--- DCT, to its fast growing auto industry. This new gear box is smaller and lighter that traditional automatic gear box, offering benefits such as better driving experience and better fuel economy to drivers. In next 2 years, you will see VW, Borg Warner, Getrag, and China owned Qing Shang launching their own Dual Clutch Transmissions. The full capacity invested will be around 1.5 million boxes per year.
Among all the DCTs which will be launched in China, VW’s DQ200 will be the star. This new seven-speed gearbox adopts a pair of dry, organic bonded friction linings that do not require cooling, making the drive-train more efficient through the extra ratio and the fact that less power is required for the gear selection and clutch servo system. Since the clutch does not require cooling the quantity of oil was reduced from 7-litres in the six-speed DSG gearbox to only 1.7-litres in the new seven-speed system. Measuring only 369 mm in length and weighing only 79 kg including the dual-mass flywheel the gearbox is remarkably compact.
The adoption of DCT technology will make China’s car industry much “Greener” and more energy efficient. The spare part distributor should pay attention to this new trend, adding new product lines to the inventory to meet the future demands.
Details for DCT please refer to the following link http://www.vw.com.cn/cds/?menu_uid=787
Monday, February 23, 2009
Modular Platforms from VW will create cost reduction opportunities for the whole value chain, including After Sales Distributors.
Adopting platform strategy to increase economies of scale is no secret for the industry. Specific to VW China, volume platforms include PQ 34, on which Lavita and Bora are built on, and PQ35, on which Octovia, Sagita, and Golf are built on. Other than cost advantage, platform strategy also reduces ‘time-to-market” during development period, increasing productivity dramatically.
Now, VW China is planning and executing an even more aggressive move to push platform strategy even further through a universal Modular Platform, MQB. This new platform adopts modular assembly and would bear success models for VW and Skoda’s C- and D-segment cars, which are current built on PQ35 and PQ46 platforms, such as Passat, Octavia, and Golf.
What is the implication? MQB platform will increase the synergy and economies of scale by sharing more common components. This is good news for the entire value chain. The increased commonality will reduce product lines distributor carries, therefore reducing the current inventory level and cost.
The new platform will start in 2010. Please refer to VW website for details (http://www.vw.com.cn/)
What is the implication? MQB platform will increase the synergy and economies of scale by sharing more common components. This is good news for the entire value chain. The increased commonality will reduce product lines distributor carries, therefore reducing the current inventory level and cost.
The new platform will start in 2010. Please refer to VW website for details (http://www.vw.com.cn/)
Tuesday, February 17, 2009
The long prosperity of Toyota Corolla in China and Hidden opportunity for aftermarket entrepreneurs
In China, the C-segment (compact car segment) is the fastest growing segment and has large potential from the family car buyers group. The entry and mid-level C-segment is dominated by Korean background models such as the Hyundai Elantra and Buick Excelle.
With the launch of the new 1.8L Corolla (platform 238L) in May, 2007, Toyota China slashed the price of the old 1.6L Corolla (platform 316) to 127K RMB to make it a competitive new player in the entry and mid level C-segment car market. It will be a direct rival to the Buick Excelle and Hyundai Elantra. The new Corolla represents a characterless position that will expand its customer’s base significantly. In 2008, Corolla production reached 178,000 units, making it the No. 2 volume car in the C-segment in China, following the VW Jetta.
Looking into the future, about next 5 years, Toyota hopes that the old Corolla can sell around 65K units per year. Besides the Camry, the new Corolla is the second-highest volume car and could substantially help Toyota raise its market share in the future. These two Corollas will create major growth for Toyota China.
While Corolla sells well during the years, the Car-par will generate business opportunities for aftermarket players. Especially, the platform change from old 316 to 238, in 2012 from 238 to 140X, will re-structure the supply route for spare parts.
With the launch of the new 1.8L Corolla (platform 238L) in May, 2007, Toyota China slashed the price of the old 1.6L Corolla (platform 316) to 127K RMB to make it a competitive new player in the entry and mid level C-segment car market. It will be a direct rival to the Buick Excelle and Hyundai Elantra. The new Corolla represents a characterless position that will expand its customer’s base significantly. In 2008, Corolla production reached 178,000 units, making it the No. 2 volume car in the C-segment in China, following the VW Jetta.
Looking into the future, about next 5 years, Toyota hopes that the old Corolla can sell around 65K units per year. Besides the Camry, the new Corolla is the second-highest volume car and could substantially help Toyota raise its market share in the future. These two Corollas will create major growth for Toyota China.
While Corolla sells well during the years, the Car-par will generate business opportunities for aftermarket players. Especially, the platform change from old 316 to 238, in 2012 from 238 to 140X, will re-structure the supply route for spare parts.
Saturday, February 14, 2009
VW Jetta's life cycle will be longer than expected
China is a vast country. Jetta is one of the most popular cars from VW's jointventure, FAW-VW. Jetta's easy maintenance and reliability assure a customer base of private clients, taxi fleets(almost 25% demand), and some government orders. FAW-VW launched its Chengdu plant for production of the Jetta. Chengdu is expected to guarantee more supply of the Jetta for western China wehre budget cars are popular.
Now it is getting clear that demand from small and mid-size cities is growing steadly. This trend will help Jetta's sales in the long term. The taxi demand for replacement will also benefit its sales.
With all the factors considered, Jetta's lifecycle will be longer than VW expected. And this trend will help after-sales market generate more sales on spare parts.
More serious about China's passenger car market? please go to www.kpmg.com.cn. Read "Momentum: driving forces in China's car maket" in Virtual library section.
Now it is getting clear that demand from small and mid-size cities is growing steadly. This trend will help Jetta's sales in the long term. The taxi demand for replacement will also benefit its sales.
With all the factors considered, Jetta's lifecycle will be longer than VW expected. And this trend will help after-sales market generate more sales on spare parts.
More serious about China's passenger car market? please go to www.kpmg.com.cn. Read "Momentum: driving forces in China's car maket" in Virtual library section.
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