Automobile Industry 01 (Aug 08 - Sep 15)

[winston]

The Demographic Dent in Auto Sales by Rodney Johnson

Living in Florida requires a lot of patience. A common cause of frustration is the endless stream of retirees that rush to the Sunshine State, only to make moving slowly into an art form once they’ve arrived. Whether it’s on the road or in line at a store, getting stuck behind a person who has all day to do nothing, including getting to their destination or finishing their transaction, can send you over the edge.

But there is a great time to be stuck behind retirees — when they take their classic cars on the road. It’s common to see cars from the 30’s and 40’s, along with the normal parade of hot rods from the ‘50s and muscle cars from the ‘60s. There is also another place we like to see retirees — turning in their daily driver cars at used car lots.

The cliché about a 10-year-old car with very low miles because it was driven by a little old lady who only took it to church is more than a sales pitch down here, it’s often the truth. This gives Floridians a great supply of low mileage cars. As more boomers join the ranks of retirees, it only makes sense that these cream-puff used vehicles will keep hitting local car lots.

That’s good news for consumers, but not so good news for new car dealers. Unfortunately for this group, the bad news starts long before retirement…

According to our research on consumer spending patterns, the highest rate of spending on new cars occurs around age 54. This makes sense because if the average kid is born to 28-year-old parents, then that child leaves the house when his parents are right around 50. This gives a 54-year-old more discretionary income to buy the car of his or her dreams.

This might not be the last car purchase of the consumer’s life, but so far it has been the most expensive. After that consumers are either closing in on or have already reached retirement, and might lean toward more affordable vehicles, and will keep them longer.

From our immigration-adjusted birth index we know that the peak year of births for boomers was 1961. That group turns 54 in 2015, which indicates lower car sales to the boomers in the following years. As boomers turn this corner, car makers will have to find new markets to keep their volume up. Chances are this will be a tough sell.

As boomers slow their auto purchases, it would be logical to turn to the next largest generation, millennials. This group experienced a surge in births in 1990, which led to a flood of young people reaching adulthood in the late 2000s. With our continued weak economy and an over-supply of labor, millennials are not finding a hospitable job market.

While college graduates are still finding employment, 44% are in positions that don’t require a degree, so they are under-employed. To go along with having a job that doesn’t require college, these workers are earning less than their better-positioned peers. In short, the young generation is struggling to make ends meet, which puts a crimp in their spending on big purchases.

This situation is exasperated by the growing use of car-sharing programs and ride services such as Uber, which lessen the need for urban dwellers to have a car at all. If the young generation is not earning as they expected, and have less of a need to own a vehicle outright anyway, what is it that will drive them onto car lots in the years to come?

Luckily, the car industry seems to have figured this out. Instead of foregoing sales or lowering revenue targets, the auto industry has chosen to lend more money to people with bad credit, and extend the terms over a longer period of time. In the first half of 2014, 31% of car loans were to people with poor credit, while 25% of all car loans in the first quarter of 2014 were six to seven years in duration.

This pulled the average car loan to 5 ½ years, which is a record. Add to this mix the exceptionally low interest rates courtesy of the Federal Reserve, and you have a perfect recipe for an asset bubble that will eventually pop.

So far in 2014 auto sales have been strong, reaching over 17 million units on an annualized pace before dropping back a bit in September. These are heady times for auto manufacturers, but based on demographic trends, they should be preparing for leaner sales ahead.

Source: Economy & Markets

[winston]

China auto market growth may halve to 7% this year

SHANGHAI: Growth in China's auto market, the world's biggest, will halve to 7 percent this year weighed down by a slowing economy, the head of an industry body said on Saturday.

"Personally, I think growth this year can reach 7 percent," Dong Yang, secretary general of the China Association of Automobile Manufacturers (CAAM), told reporters on the sidelines of an industry conference in Shanghai.

"The economy is slowing. The auto industry would reflect that but typically lags the economic cycle by a bit."

CAAM had forecast China's auto market, which grew by 13.9 percent last year, to expand at 8.3 percent in 2014. Dong said CAAM will not make any official revisions to its forecast.

Carlos Ghosn, head of Japanese carmaker Nissan Motor Co Ltd and its French alliance partner Renault SA, told the same conference he was still optimistic about China's outlook.

"From time to time we have slowdown ... but fundamentally I'm still very optimistic on the fact that the long-term trend in China is up and carmakers should be prepared for that," Ghosn said, pointing to China's low car ownership level compared with other major markets.

Nissan has said its China sales fell by 20 percent in September from a year earlier, the third straight month of decline, due to sluggish sales of light commercial vehicles and increased competition in the passenger car segment.

During the first nine months of the year, overall vehicle sales in China rose 7 percent from the same period a year earlier, according to CAAM data.

China's annual economic growth slowed to 7.3 percent in the third quarter - the weakest pace since the depths of the global financial crisis, and down from 7.5 percent in the previous quarter.

Source: Reuters

[winston]

TOL:-

BMW subsidizing dealers in China. So is Toyota.

If this is not a sign that things are slowing down, what is ?

[winston]

Carmakers Honda and Ford struggle… both sink nearly 15% over the past four months.

[behappyalways]

2015 will be a huge year for automakers
http://finance.yahoo.com/news/2015-will ... 37221.html

[winston]

DBS Vickers latest ratings & TPs for Chinese auto stocks (Table)

DBS Vickers updated in the research report its investment ratings and target prices for Chinese auto stocks.

Stock / Investment Ratings / Target Price (HK$)

Auto parts companies
BRILLIANCE CHI (01114.HK) 0.000 (0.000%) Short selling $16.38M; Ratio 12.734% / Hold / 15.1
DONGFENG GROUP (00489.HK) 0.000 (0.000%) Short selling $9.19M; Ratio 3.653% / Buy / 15.7
GEELY AUTO (00175.HK) 0.000 (0.000%) Short selling $8.35M; Ratio 8.213% / Buy / 3.7
GREATWALL MOTOR (02333.HK) 0.000 (0.000%) Short selling $154.53M; Ratio 48.600% / Hold / 42.7
GAC GROUP (02238.HK) 0.000 (0.000%) Short selling $6.88M; Ratio 41.484% / Buy / 8.3

Auto dealerships
ZHENGTONGAUTO (01728.HK) 0.000 (0.000%) Short selling $647.72K; Ratio 12.658% / Buy / 5.5
DCH HOLDINGS (01828.HK) 0.000 (0.000%) Short selling $559.33K; Ratio 8.127% / Buy / 5.05
ZHONGSHENG HLDG (00881.HK) 0.000 (0.000%) Short selling $992.12K; Ratio 62.116% / Buy / 8.8

Automakers
MINTH GROUP (00425.HK) 0.000 (0.000%) Short selling $1.38M; Ratio 21.471% / Buy / 19.1
NEXTEER (01316.HK) 0.000 (0.000%) Short selling $50.82K; Ratio 0.529% / Buy / 9.3
POWER XINCHEN (01148.HK) 0.000 (0.000%) Short selling $38.16K; Ratio 1.522% / Buy / 4.4

Source: AAStocks Financial News

[winston]

DBS Vickers prefers auto parts companies, auto dealerships, lastly automakers

DBS Vickers stated that the growth in Chinese auto industry will slow down this year, following the vigorous growth over the past two years.

The broker preferred auto parts companies, auto dealerships and lastly the automakers.

They are bullish about the auto parts companies with global business exposure and auto dealerships that cater to changing consumer habits.

The stocks that are in concordance with the themes of globalization and consumerism are as follows:
MINTH GROUP (00425.HK) 0.000 (0.000%) Short selling $1.38M; Ratio 21.471% ,
POWER XINCHEN (01148.HK) 0.000 (0.000%) Short selling $38.16K; Ratio 1.522% ,
NEXTEER (01316.HK) 0.000 (0.000%) Short selling $50.82K; Ratio 0.529% ,
ZHENGTONGAUTO (01728.HK) 0.000 (0.000%) Short selling $647.72K; Ratio 12.658% and
DCH HOLDINGS (01828.HK) 0.000 (0.000%) Short selling $559.33K; Ratio 8.127% .

The broker is also positive about DONGFENG GROUP (00489.HK) 0.000 (0.000%) Short selling $9.19M; Ratio 3.653% .

Source: AAStocks Financial News

[winston]

not vested

Goldman Sachs ratings & target prices for China auto stocks (Table)

Goldman Sachs has listed the latest investment ratings and target prices for Chinese auto stocks as follows:

Company Name / Investment Rating / Target Price (HK$)
GAC GROUP (02238.HK) 0.000 (0.000%) Short selling $3.24M; Ratio 31.598% / Buy / 8.77->9.25
DONGFENG GROUP (00489.HK) 0.000 (0.000%) Short selling $18.98M; Ratio 11.347% / Neutral / 12.74->12.78
BRILLIANCE CHI (01114.HK) 0.000 (0.000%) Short selling $13.39M; Ratio 11.607% / Sell->Neutral / 11.03->13.46
BYD COMPANY (01211.HK) 0.000 (0.000%) Short selling $58.11M; Ratio 24.885% / Neutral->Buy / 50.82->36.2
GEELY AUTO (00175.HK) 0.000 (0.000%) Short selling $11.07M; Ratio 13.014% / Neutral->Buy / 2.94->3.71
GREATWALL MOTOR (02333.HK) 0.000 (0.000%) Short selling $71.50M; Ratio 21.796% / Buy->Neutral / 42.2->46.62
SINOTRUK (03808.HK) 0.000 (0.000%) Short selling $152.45K; Ratio 3.162% / Neutral / 3.76->3.69
WEICHAI POWER (02338.HK) 0.000 (0.000%) Short selling $3.44M; Ratio 19.300% / Sell / 20.76->20.74
XINGDA INT'L (01899.HK) 0.000 (0.000%) Short selling $26.31K; Ratio 1.088% / Neutral / 2.91->2.69
MINTH GROUP (00425.HK) 0.000 (0.000%) Short selling $3.48M; Ratio 19.195% / Neutral / 14.27->14.8
ZHENGTONGAUTO (01728.HK) 0.000 (0.000%) Short selling $589.18K; Ratio 5.511% / Buy / 5.42->4.66
BAOXIN AUTO (01293.HK) 0.000 (0.000%) Short selling $758.58K; Ratio 0.997% / Neutral->Buy / 6.2->5.66
ZHONGSHENG HLDG (00881.HK) 0.000 (0.000%) Short selling $732.77K; Ratio 15.323% / Sell / 6.41->6.01

Source: AAStocks Financial News

[behappyalways]

Too Many Car Factories in China?
http://www.bloomberg.com/news/articles/ ... rs-margins

[winston]

Car makers General Motors, Ford, and Toyota are up double digits over the past three months.