China Growth For Major Car Companies Slows

It may turn out that China is not the Holy Grail for multinational car companies that they believed it would be. The world’s largest car market was supposed to offer the opportunity for corporations like Ford (NYSE: F) and GM to post 40% or 50% sales increases per month. The number of light vehicles sold in the People’s Republic was rising at similar rates after all. Ford and GM just had to ride the tide.

August showed a sharp slowing of sales for foreign car companies operating in China. GM’s sales rose only 19% to 181,625 when compared to August a year ago. According to The Wall Street Journal, Ford’s sales rose 24% to 44,047 and sales for Toyota Motor (NYSE: TM) were up 22% to 503,100.

The figures for the three car companies are odd because of the rapid growth rate of the overall market as posted by the Chinese government for August. The Journal says that light vehicles sales rose to 1.21 million, up 56% based on China’s numbers.

The US car companies are either bleeding sales in China, or the official government numbers are wrong as is often the case on the Mainland. GM must hope that its growth rate increases. The appeal of its IPO will be to some extent based on its Chinese figures.

There could be something else going on in China. Local car companies have begun to ramp up manufacturing using methods learned from firms based in the US, Japan, and Europe. The Chinese government, which owns a piece of all major car firms based there could certainly provide financial aid for their rapid expansion. Foreign companies may be faced with rising local competition more than with a car market in which growth has slowed considerably.

The European Chamber of Commerce recently complained that China is not a level playing field for outside companies. That may be right and car companies based overseas may be among those that learn that the People’s Republic will leverage its massive cash position to make sure it has a large share of any critical industry.

Douglas A. McIntyre