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Related: About this forumThe Unnerving Thing Global Automakers Just Said About China’s Economy
The Unnerving Thing Global Automakers Just Said About Chinas Economy
by Wolf Richter August 5, 2015
Global automakers, still intoxicated with their own optimism after years of white-hot growth that transformed Chinas auto market from a backwater to the largest market in the world, have an increasingly chilling message.
The auto industry is a huge force in driving economic growth in China. Most vehicles sold in China are manufactured in China. The component industry has been booming. The distribution and dealer network has been growing in leaps and bounds. Every new plant and dealership means more construction, more equipment, more jobs. Then theres finance and insurance and all the other elements that make up the car business. But now theres a slowdown.
Today it was BMW. China has been BMWs largest, most promising, nirvana-like market. Not that BMWs results for Q2 were that bad. The euros swoon produced a year-over-year sales gain of 20%. Yet, due to soaring costs, despite the weak euro, net profit fell 1.1%.
The problem: Chinas market is normalizing and becoming increasingly competitive, BMW said in a statement. In the medium and long term, we remain utterly convinced of Chinas potential for growth, it said. But it warned, If conditions on the Chinese market become more challenging, we cannot rule out a possible effect on the BMW groups outlook.
Chinas contribution to BMWs operating profit dropped 23% in Q2, echoing Volkswagens report last week. BMW has cut production in China by 16,000 vehicles this year, CFO Friedrich Eichiner explained. He blamed the stock market. As it crashed, it kept customers from making large purchases; others demanded hefty discounts. ................(more)
http://wolfstreet.com/2015/08/05/unnerving-thing-global-automakers-said-about-chinas-economy/
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The Unnerving Thing Global Automakers Just Said About China’s Economy (Original Post)
marmar
Aug 2015
OP
djean111
(14,255 posts)1. Do corporations NEVER plan for a downturn?
Did BMW actually plan on selling more and more cars indefinitely?
Did coal actually think they would see no repercussions from solar and wind?
Ditto for nuclear power and the big power companies?
It is like all the business plans nowadays assume nothing but quarterly increases.
friendly_iconoclast
(15,333 posts)2. Planning for a downturn cuts into current profits, so no...
Warpy
(111,339 posts)3. Even before the stock market went bust they'd just about hit saturation
because anyone who had the means to buy one had bought one. The car owning class in China isn't that huge, and while wages are going up, they're not going up that fast or far.
I'm not surprised by this. I'm a little surprised the car companies seem to be.