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Daniel P. Malone
ASIA: "M&A Dealtracker India (May 2011)" report. 16-page report by Grant Thornton India.
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backASIAtalk March, 2012
China Automotive Monthly: Executive Summary (January, 2012)
2012 to Be a Year of Transition
With 2011 now closed, attention turns to the prospects for China’s automotive industry in 2012. While naysayers are talking about a continuation of the weak market seen in 2011 and optimists are talking about a rebound, we at LMC Automotive prefer to focus on the key changes we can expect to see in the market this year, as we expect there to be many. We believe that 2012 will be a key transitional year in the development in China’s automotive industry.
Transition of the Economy
The economic environment is one of the most critical factors driving the automotive market. Influenced by both external and internal difficulties, China’s GDP growth in 2012 will most likely go below 9%, its lowest level since 2001.
The global economy is facing its greatest downward pressure since 2008, largely due to the debt crisis in the Eurozone, a slow recovery of the US and Japanese markets and the unrest in Middle East and North Africa. China, like all developing countries, will inevitably feel the impact of the downturn in the mature markets, with declining exports, retreating foreign capital and the increasing risk of inflation.
The domestic economy is also getting worse. Though some positive signals of the tightening monetary policies have been seen, controlling inflation will remain a priority for Beijing this year. We have seen the halting of a large number of projects in high-speed railways, real estate and high energy-consuming industries in the second half of 2011 due to a shortage of loans, and we believe this situation will remain the same through 2012. A weak stock market and rising product prices will also weaken domestic consumption.
The old “three carriages” (investment, export and consumption) of China’s economy are struggling to pull with as much force as they have done in the previous decades. Beijing is being forced to change the way it structures the economy and its development. We can expect the dependence on domestic demand to increase and a decreased reliance on foreign demand. The year 2012 is going to be the beginning of this transition.
Transition of the Policy
Policy continues to play a very important role in the development of the automotive industry. The crown of being the largest market in the world was assumed proudly, but the environmental problems caused by the soaring vehicle population is putting increased pressure on the government. Recent changes in taxation, fees and some regulations indicate a transition in policy.
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Source: LMC Automotive - GAI
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