TPT May 2019

G LOBA L MARKE T P L AC E

China’s car-building capacity is now roughly equal to that of North America and Europe combined, with more car factories being built to meet regulators’ demands for more electric cars. But a slowing economy, and an end to tax breaks for car buyers, are bringing the industry back to earth. In January, car sales in China fell 18 per cent from a year earlier. The average car factory in China, already operating at little more than half capacity, has slowed even more amid the sales slump, according to consulting firm LMC Automotive. American brands are also being squeezed. The Chinese elite still prefer the premium German brands, such as Mercedes, Audi and BMW, while more frugal families buy Chinese and Japanese cars and, increasingly, buy used. An unexpected blow has been struck by the ride-hailing business. The global auto industry has worried for years that companies like Uber and Lyft could eat into demand, particularly among young customers. That appears to have happened in China, where dense urban cities have enhanced the appeal of Didi Chuxing, the Chinese ride-hailing giant. Each year, Didi now carries twice as many passengers in China as Uber carries in the rest of the world combined. “None of the multinational automakers foresaw how disruptive that would be to demand,” said Bill Russo, a former chief executive of Chrysler’s operations in China. Young people in China are also more open to Chinese brands, thanks in part to their improved quality. “They’re a lot more favourably disposed towards Chinese brands, and they have a pride in the Chinese brands,” said Nigel Harris, the president of Ford’s main joint venture in China, Changan Ford. This winter has been difficult for American brands in China. Sales of GM’s Chevrolet and Buick models have faltered (though Cadillacs continue to sell well), and Chrysler’s Jeeps face stiff competition from cheaper sport utility vehicles made by Chinese companies. After a dismal autumn, Ford sold 70 per cent fewer cars in China in January than it did in the same month a year earlier. The automakers are tweaking their ranges to improve sales. GM and Ford are ramping up production of their respective Cadillac and Lincoln brands to tap the luxury market, and GM has expanded its bargain Chinese brands, Baojun and Wuling. In a potentially risky move for its brand, Ford has put its logo on the Territory, an inexpensive SUV mostly designed and built by a Chinese automaker, Jiangling Motors. It is too early to tell how well Ford’s move will go, but at a Ford dealership in Chongqing, the $16,000 Territory was selling briskly, while a number of Focus cars, priced at $22,000, have sat unsold since 2017. “As soon as one arrives,” said salesman Li Pengfei of the Territory, “someone picks it up.” Nowhere are the problems of Detroit automakers more apparent than in Chongqing, an often foggy city built on steep slopes overlooking the confluence of the Yangtze and Jialing rivers. When a local hiring hall held an automotive- themed day, it was mobbed with former Ford employees who had accepted severance payments and were looking for their next jobs. The company has changed from running factories on up to three shifts, almost around the clock, to just a single shift.

News in br ief India-EU free trade pact demands lower tariffs EU ambassador to India, Tomasz Kozlowski, told the Hindu Business Line that: “The EU is ready for an asymmetrical agreement, but has its political compulsions too.” The proposed India-EU Free Trade Agreement (FTA) cannot be concluded without commitments on lowering import duties on cars and car parts as this is a “politically sensitive issue for the bloc.” “For political reasons, no FTA will be approved in the EU parliament without having car and car parts included. We can have a very long transitional period, but we need to include cars,” Kozlowski stressed, speaking at a forum on India-EU cooperation in trade and sustainable development, organised by the CII and EU trade body amfori. India and the EU have been negotiating the FTA, officially called a Broad-based Trade and Investment Agreement (BTIA), since 2007. While the EU is unhappy with India’s offers in the area of automobiles and wines and spirits, India wants more access for its professionals and recognition as a data-secure country. Kozlowski said that the EU is ready to introduce a substantial level of asymmetry to the agreement, aware that India is a developing country and not at the same level as Japan and Korea, but it has to be beneficial for both sides. Even after the UK leaves the EU, the EU will continue to be India’s biggest trade partner and the main source of technology to the country. If both India and the EU lowered their levels of ambition, a deal could be possible, said Abhijit Das, head of the Centre for WTO Studies, pointing out that the negotiations have been stuck for too long on just a handful of issues. The EU ambassador believes there is a will on both sides to make progress with the stuck talks, as evidenced by active contacts at chief negotiator and commerce secretary levels, and concluded: “It means we are full of good will from both sides, trying to narrow existing gaps.” Questioning workplace ethics A group of Microsoft workers has demanded the cancellation of a $480 million contract to supply the US army with HoloLens headsets that, they say, would turn real-world battlefields into a video game. Microsoft’s HoloLens displays use augmented reality, which means viewers can see virtual imagery superimposed on the scenery in front of them. A letter, signed by over 50 Microsoft employees and circulated on an internal messaging board, said the technology could help soldiers find and kill adversaries on the battlefield. The employees say they “refuse to create technology for warfare and oppression.” “We did not sign up to develop weapons, and we demand a say in how our work is used,” the letter states, and asks Microsoft CEO Satya Nadella and president Brad Smith to cancel the contract.

64

www.read-tpt.com

MAY 2019