Tag Archives: GM

GAC Stays in the Fast Lane in April

gac overall units

While April US auto sales have disappointed across the board, with declines in all major automakers, China has yet to release numbers for April, with the exception of GAC, 2238 HK.  If March offers a clue as to performance, it will be a mixed bag.  For those with declines in the first quarter, the increase in the sales tax on the majority 1.6 liter or less vehicles was blamed; Ford and GM. Despite the change in tax, some auto makers saw sales growth in China.  Hyundai, however, saw a dramatic decline as a result of stoppages related to discontent over the US THAAD missile in South Korea.  VW Audi, took a dive at least partly due to dealer discontent over its planned 2nd jv with SAIC.  Thanks to company specific issues, the outlook for overall China growth, projected at 5%, is cloudy. (The data is primarily from Reuters except for Chinese makers Geely, GAC, Ford and Daimler which were based on SEC and HKEX filings).

Major Autos China March

Skies are sunny for GAC, however, which just reported 36% growth ytd in April over 2016.  If revenues and costs stay on track from the first quarter as reported here, it bodes well for the GAC’s stock.

GAC April

Honda and Toyota have shown significant growth, but the proprietary Guangzhou has been an out sized contributor to growth as has Fiat Chrysler.

Guangzhou units

FCA April

While recent performance is no indicator of the future, at least in the short term GAC is conservatively valued with a trailing p/e of 9.

GAC stock

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China Auto Stocks Drop on Uncertainty

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Hong Kong Listed Chinese auto stocks were mixed yesterday, 4/11/17, despite a minuscule drop in the Hang Seng.

Auto Stocks upd

 

Data Source: Bloomberg

All of the above stocks, with the exception of BAIC 1958 hk, had previously reported sales for March.

Update: China March Overall Auto Sales

Depending on which source you read, and what they interpreted, monthly and year to date auto sales were up.  How much is apparently subject to interpretation from a meeting with the China Association of Automobile Manufacturers, (CAAM).  However, nothing has been published on the CAAM website regarding the update.  Unlike other international auto manufacturers, sales are not presented as seasonally adjusted.

January and February are poor monthly indicators due to the China Lunar New Year, aka Spring Festival.  For 2017 it fell on January 28, 2017: 2016; in 2016 it fell on February 8, 2016. Technically it lasts approximately one week, when all of China is on vacation – but the impact can be felt as workers leave or change jobs two weeks in advance. This even makes January to February sequential sales and year on year data unpredictable.

Reuters:

First Quarter Auto Sales China up 7%; March up 4% to 2.5 million units

Wall Street Journal:
First Quarter Vehicle Sales China up .59% to 2.84 million units; Passenger Sales March up 1.7% to 2.1 million units.

Both agreed that CAAM held to its earlier projection of 5% auto sales growth in China for 2017.

China March 2017 Auto Sales Picture – Proceed With Caution

The downward slide yesterday occurred as two reports threw tacks on the road of this fragile, critical barometer of China’s economy.  Now the biggest single car market in the world, the closely watched auto sector is under scrutiny.  2016 managed overall increases thanks partly on the sales tax reduction from 10% to 5% for the year on smaller liter engines, (1.6 liters – the majority of autos sold in China in 2015).  Under pressure to continue growth, instead of resuming the 10%, the tax was partially raised to 7.5% starting in January 2017 through the end of the year.

First Report: High-flying Geely 175hk, was flagged by Credit Suisse, its report, said

..this is the first monthly decline in March in over ten years. Continuing the falling trend for four days, it once fell to $10.44 at most, hitting over 1-month low; it last printed at $10.52, down 4.7%, on surging volume of 117 million shares.

It went on to project Geely’s gross profit margin would be under pressure and kept it at neutral with a target price of $11.4 hkd.

Geely had actually released its numbers on April 7th, with strong year on year growth so the blame for the drop on that report is most likely misplaced.

Geely March

Production Cut

While Geely’s drop is of concern, a report by CICC, 3908 hk, (Per Bloomberg, the Goldman Sachs of China), was more alarming, with an output cut of 16.7% by Great Wall Motors 2333hk.  Although other companies weren’t cited, the report implied other auto makers had done the same.

Slow Lane Data Releases

Auto sales data, unlike elsewhere in the world, is slow to be officially released in China.  The China Association of Automobile Manufacturers, CAAM, releases data for the prior month around the 22nd of the following month.  Specific company data is sporadic and lacks conformity either in presentation and or release dates. This creates the perfect situation for the market’s most hated state: uncertainty.

Mixed Picture

Adding to the uncertainty, March numbers in China reported to date from domestic and international players have been inconsistent.

In China, Nissan reported year to date sales in March up 5.3%; GM saw a ytd decline of 5.2% with Toyota up just 1.7%.

Domestically, auto sales were seemingly resilient, with the exception of Great Wall 2333   hk and Dongfeng 489 hk. Great Wall is a home grown auto company while Dongfeng sells autos produced by joint ventures with Nissan, Honda, PSA and Renault.

Great Wall March

Dongfeng

GAC 2238 hk, showed impressive growth, buoyed by increases in its proprietary brand Guangzhou as well as its JVs with Honda, Toyota and Chrysler.  A breakdown of those brands was shown here.

GAC Mar

 

BAIC 1958 hk, hasn’t yet reported sales.  However, as noted previously, China’s unhappiness with South Korea has prompted reports of Hyundai reducing production hours in China.  Hyundai units made up 60% of BAIC’s unit sales in 2016.

As sales data for March trickles in, these stocks look poised for more negative surprises.

(Sales data and graphs compiled from HK filings.)