Page 166 - 2020 White Paper on the Business Environment in China
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0 White Paper on the Business Environment in China
suggesting it is in no hurry to set up fully-owned slump. One of the largest contributing factors
plants in the near future. In November 2018, are stock prices. Retail investors account for
Tesla’s chief executive Elon Musk said the US auto about 80 percent of China’s equity market based
market was three years away from making cars on volume. Stock values have come to be seen
on the mainland. But the ownership structure as an indicator of general consumer appetite.
has proven to be a stumbling block, with Chinese When the benchmark Shanghai Stock Exchange
authorities insisting that the plant be set up Composite Index falls below 3,000, customers
through a joint venture with local partners, typically put off auto purchases. This trend
while Musk wanted it to be fully owned by Tesla. closely mirrors the losing streak in the auto
General Motors, Ford and Volkswagen, are among market. Speculative real estate investments
the foreign auto makers that are only allowed explain part of the woes as well. The Chinese
to manufacture their vehicles in China through government is known to loosen restrictions on
partnerships with local carmakers at present (Lee home loans whenever the economy sours. As a
and Ren). result, there is strong pressure to spend on real
estate and take on debt, so money doesn’t flow
into the automobile market, causing a significant
As for now, however, global brands are impact. China’s policy decisions have not helped.
definitely suffering. According to statistics Starting July 2019, about half the country adopted
released by China Association of Automobile stricter China VI emission standards. The rollout
Manufacturers (CAAM), for the first five months came a year earlier than scheduled, despite
of 2019, the market share of US auto brands in some pushback surrounding concerns over the
China dropped from 10.9% to 9.6%. Ford, GM auto market already suffering amid the US trade
and Jeep are losing their strengths in China’s war. The government had apparently anticipated
competitive market (Fan). Ford said that it sold a surge in demand from those looking to trade-
nearly 22 percent fewer vehicles in China during in their old cars for autos that conform to China
the second quarter of 2019 than in the same VI standards. But consumers held back on
period the previous year. General Motors posted purchasing, believing that the dealerships lack
a 12 percent drop in vehicle sales in China for the full lineup of such vehicles. Energy vehicle
the quarter. Suppliers are feeling the pain. subsidies have also negatively affected auto sales.
BASF, the German chemicals giant, on slashed The inducements used to be a major contributor
its profits forecast for the year in July, blaming to the expanding energy vehicle market, but the
weak car sales and trade tensions between the government decided to cut the subsidies by up to
US and China. Globally, auto production declined nearly half starting in 2019. That move left a large
by around 6 percent in the first half of 2019. In dent in the auto market, leaving many in the
China, the world’s largest automotive market, the industry to question the government’s timing in
decrease was more than twice as high, at around curtailing the financial support. China is working
13 percent. A reluctance by consumers to make under a patchwork of competing policy measures
big ticket purchases in an uncertain environment affecting the auto industry. Guangdong Province
is partly to blame, but a government campaign has eased restrictions on issuing license plates
against deadly levels of pollution is also having for a number of major cities, but the new norms
an impact. A brief turnaround in June was largely have yet to take hold to the extent of driving auto
due to heavy discounting to clear inventories sales. Some in the industry are placing hopes
of cars with older emission standards— t on tax breaks for small-engine vehicles. The tax
“significant losses” to dealers and producers— relief was instrumental in boosting sales after
and it predicted a “lackluster” market ahead. The the 2008 global financial crisis, and following the
first half sales and production figures in 2019 stock market crash in 2015. However, that policy
were worse than it expected (He). approach tends to cannibalize future demand. In
addition, the last tax break lasted until the end of
General Motors and Volkswagen—the 2017. Under current conditions, it will be tricky
two market leaders in China—posted poor to push forward additional tax relief for small
performances as well, meaning none of the vehicles. The tax breaks have been scattershot,
leading auto manufacturers has escaped the
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suggesting it is in no hurry to set up fully-owned slump. One of the largest contributing factors
plants in the near future. In November 2018, are stock prices. Retail investors account for
Tesla’s chief executive Elon Musk said the US auto about 80 percent of China’s equity market based
market was three years away from making cars on volume. Stock values have come to be seen
on the mainland. But the ownership structure as an indicator of general consumer appetite.
has proven to be a stumbling block, with Chinese When the benchmark Shanghai Stock Exchange
authorities insisting that the plant be set up Composite Index falls below 3,000, customers
through a joint venture with local partners, typically put off auto purchases. This trend
while Musk wanted it to be fully owned by Tesla. closely mirrors the losing streak in the auto
General Motors, Ford and Volkswagen, are among market. Speculative real estate investments
the foreign auto makers that are only allowed explain part of the woes as well. The Chinese
to manufacture their vehicles in China through government is known to loosen restrictions on
partnerships with local carmakers at present (Lee home loans whenever the economy sours. As a
and Ren). result, there is strong pressure to spend on real
estate and take on debt, so money doesn’t flow
into the automobile market, causing a significant
As for now, however, global brands are impact. China’s policy decisions have not helped.
definitely suffering. According to statistics Starting July 2019, about half the country adopted
released by China Association of Automobile stricter China VI emission standards. The rollout
Manufacturers (CAAM), for the first five months came a year earlier than scheduled, despite
of 2019, the market share of US auto brands in some pushback surrounding concerns over the
China dropped from 10.9% to 9.6%. Ford, GM auto market already suffering amid the US trade
and Jeep are losing their strengths in China’s war. The government had apparently anticipated
competitive market (Fan). Ford said that it sold a surge in demand from those looking to trade-
nearly 22 percent fewer vehicles in China during in their old cars for autos that conform to China
the second quarter of 2019 than in the same VI standards. But consumers held back on
period the previous year. General Motors posted purchasing, believing that the dealerships lack
a 12 percent drop in vehicle sales in China for the full lineup of such vehicles. Energy vehicle
the quarter. Suppliers are feeling the pain. subsidies have also negatively affected auto sales.
BASF, the German chemicals giant, on slashed The inducements used to be a major contributor
its profits forecast for the year in July, blaming to the expanding energy vehicle market, but the
weak car sales and trade tensions between the government decided to cut the subsidies by up to
US and China. Globally, auto production declined nearly half starting in 2019. That move left a large
by around 6 percent in the first half of 2019. In dent in the auto market, leaving many in the
China, the world’s largest automotive market, the industry to question the government’s timing in
decrease was more than twice as high, at around curtailing the financial support. China is working
13 percent. A reluctance by consumers to make under a patchwork of competing policy measures
big ticket purchases in an uncertain environment affecting the auto industry. Guangdong Province
is partly to blame, but a government campaign has eased restrictions on issuing license plates
against deadly levels of pollution is also having for a number of major cities, but the new norms
an impact. A brief turnaround in June was largely have yet to take hold to the extent of driving auto
due to heavy discounting to clear inventories sales. Some in the industry are placing hopes
of cars with older emission standards— t on tax breaks for small-engine vehicles. The tax
“significant losses” to dealers and producers— relief was instrumental in boosting sales after
and it predicted a “lackluster” market ahead. The the 2008 global financial crisis, and following the
first half sales and production figures in 2019 stock market crash in 2015. However, that policy
were worse than it expected (He). approach tends to cannibalize future demand. In
addition, the last tax break lasted until the end of
General Motors and Volkswagen—the 2017. Under current conditions, it will be tricky
two market leaders in China—posted poor to push forward additional tax relief for small
performances as well, meaning none of the vehicles. The tax breaks have been scattershot,
leading auto manufacturers has escaped the
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