WCA November 2009

By September, some analysts were saying that showroom traffic was already starting to fall in the wake of the clunkers programme – but that the stimulus could have a lingering impact in the ensuing months. On 1 st September, Mr Vlasic observed that the increase in demand from the programme had prompted several auto makers, including GM and Ford, to increase vehicle production to replenish inventories, adding to the momentum that appears to be building in the broader manufacturing sector. He wrote, “Hourly workers are being called back at a handful of plants, and some General Motors has formed a 50-50 joint venture with ❖ ❖ First Automobile Works Group (FAW), of Changchun, to make light trucks in China. The Detroit auto maker said on 30 th August that it would make a total investment in FAW-GM Light Duty Commercial Vehicle Co of $293 million. The deal that had been negotiated over several years calls for the trucks to be sold in China initially, with export opportunities to be explored later on. The joint venture with FAW, which envisions output of 200,000 units in 2010, is GM’s third with a Chinese vehicle maker but the first to involve trucks. The company’s other Chinese partnerships produce passenger cars and mini commercial vehicles, and China has been good for GM in a time of weak sales in the home market. Sales of GM passenger cars in China rose 52% year-on-year in July, according to the California-based car consultancy JD Power and Associates. In 2009, China overtook the US to become the world’s largest vehicle market. The Chinese car company BYD has said that it will offer ❖ ❖ its e6 all-electric sedans in the US in 2010, a year ahead of schedule. BYD announced 31 st August in Hong Kong that it had nearly doubled first-half net profits from a year earlier; and Wang Chuanfu, the company’s chairman, said he was considering selling more shares to US investment guru Warren Buffett, whose MidAmerican Energy Holdings bought a 10% stake in BYD in September 2008. Financial Times Shanghai correspondent Patti Waldmeir noted that BYD, although a global leader in rechargeable battery technology, is only a recent entrant to the Chinese car industry. She wrote, “Mr Wang, an engineer- turned-entrepreneur, plans to combine batteries with cars to spearhead a green revolution in electric vehicles, with the help of Chinese government subsidies.” BYD can expect competition from Honda Motor, which ❖ ❖ plans to introduce electric vehicles in the US in the first half of the new decade, joining a growing number of auto makers vying for the lead in clean technology development. Japan’s second-biggest car maker, which had focused on gas-electric hybrids, built an all-electric prototype for display at the Tokyo Motor Show in October. factories are running on overtime.” Elsewhere in automotive . . .

According to First Solar, the plant would cost $6 billion if built in the United States but could be less expensive to build in China. Reckoning First Solar’s return on the project is difficult, as US companies engaged in the new technology of solar power are heavily dependent on subsidies. Mr Randazzo noted that China is expected to enact a “feed-in tariff” that guarantees an above-market rate for power from the plant. First Solar’s profit will depend on how high that tariff is set.

Automotive

US cash-for-clunkers promotes lower fuel consumption, enables Asian auto makers to shine “This is a win for the economy, a win for the environment, and a win for American consumers,” said Ray LaHood, the US transportation secretary, in reference to the month-long cash-for-clunkers programme that ended in late August. But the real winners were the country’s Asian auto makers, led by Toyota which accounted for 19% of sales under the programme. The most popular vehicles were small cars built by Asian companies and Ford Motor, the only American auto maker to avoid bankruptcy. The three largest Japanese producers – Toyota, Honda, Nissan – sold 41% of the vehicles, as compared with their 34% combined market share through July of the year. The Toyota Corolla was the top seller, followed by the Honda Civic, Toyota Camry, Ford Focus, and the Elantra, from South Korea’s Hyundai. Not one model from GM or Chrysler made the Top Ten, although GM came in second in overall sales. The Transportation Department said that participants in the clunkers programme bought 690,000 new vehicles. About $2.9 billion of the programme’s $3 billion was distributed in the form of government vouchers worth $3,500 to $4,500 toward new-car purchases. From Detroit, Bill Vlasic of the International Herald Tribune noted how well the ideal of getting gas-guzzlers off the road was served by the Asian auto makers, whose success was driven by the type of cars in their showrooms. He wrote, “Participants in the clunkers program clearly were interested in downsizing to smaller, more fuel-efficient vehicles. Toyota and Honda have been the longtime leaders in sales of small and midsize cars in the United States. So it was hardly surprising that Corollas and Civics flew off dealer lots during the program.” (“Toyota Tops List of Cash-for-Clunkers Winners,” 27 th August) That other ideal of the programme — to give even a small boost to the national economy — was also realised, according to a preliminary analysis. The Obama administration said that third-quarter economic growth was 0.4% higher because of auto sales in July and August. In addition, GM, Ford and Honda all announced that they would increase production at some US plants because of the increased demand generated by cash-for-clunkers.

Dorothy Fabian Features Editor

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Wire & Cable ASIA – November/December 2009