Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Is the Winner of the U.S. Presidential Election - 31st Oct 20
Gold and Silver Prepare For Another Price Advance - 31st Oct 20
Gold Is Likely to Win This Election - 31st Oct 20
Why Trump Can Still Win 2020 Election - Establishment Mainstream Media Wrong Again? - 31st Oct 20
Why Budgies Need their Own Feeders - Parakeets Feeding UK - 31st Oct 20
Can Trump Still Win? US Presidential Election Forecast Matrix 2020 - 30th Oct 20
Why a Biden Win will Keep Metals Prices Rocking - 30th Oct 20
Is Silver the Next Bitcoin? - 30th Oct 20
A New World Monetary Order Is Coming - 30th Oct 20
Do These Explanations Make Sense for This Intraday Stock Market Turn - 30th Oct 20
US Presidential Election Forecast Matrix, Stock Market Uncertainty - 29th Oct 20
Stock Market Turning? Look For These Support Levels - 29th Oct 20
Silver: A Conceivable Dead-Cat-Bounce on the Cards - 29th Oct 20
Stocks are Strong but be Aware of this Continuing Pattern - 29th Oct 20
The Most Profitable Way To Play The Gold Boom - 29th Oct 20
Why You Should Hire An Accountant To Complete Your Tax Return - 29th Oct 20
Global Banking: Some Sectors Look as "Precarious as Ever" - 28th Oct 20
Silver Price Minor Dip Possible Before 2nd Major Upleg Starts - 28th Oct 20
�� How to Carve a Simple and Scary Pumpkin Face for Covid Halloween 2020 �� - 28th Oct 20
Gold Price One Last Dip Likely Then Major Upleg to New Highs - 28th Oct 20
Smart Money Is Going All-In On This New Gold Frontier - 28th Oct 20
Gold Stocks Still Correcting - 27th Oct 20
Gold and Crypto: Is This How Charts Look Before A Monetary Collapse? - 27th Oct 20
Silver's Coming Double Trigger Shotgun Price Explosion - 27th Oct 20
The $126 Billion Gold Opportunity in Australia - 27th Oct 20
Tips to Breeze through Your Spanish Classes Online - 27th Oct 20
Try The “Compounding Capital Gains” Strategy Today - 26th Oct 20
UK Coronavirus Broken Test and Trace System, 5 Days for Covid-19 Results! - 26th Oct 20
How the Coronavirus is Exacerbating Global Inequality, Hunger - 26th Oct 20
The Top Gold Stock for 2021 - 26th Oct 20
Corporate Earnings Season: Here's What Stock Investors Need to Know - 25th Oct 20
�� Halloween 2020 TESCO Supermarkes Shoppers Covid Panic Buying! �� - 25th Oct 20
Three Unstoppable Forces Set to Drive Silver Prices - 25th Oct 20
Car Insurance And Insurance Claims and Options - 25th Oct 20
Best Pressure Washer Review - Karcher K7 Full Control Unboxing - 25th Oct 20
Further Gold Price Pressure as the USDX Is About to Rally - 23rd Oct 20
Nasdaq Retests 11,735 Support - 23rd Oct 20
America’s Political and Financial Institutions Are Broken - 23rd Oct 20
Sayonara U.S.A. - 23rd Oct 20
Economic Contractions Overshadow ASEAN-6 Recovery - 23rd Oct 20
Doji Clusters Show Clear Support Ranges for Stock Market S&P500 Index - 23rd Oct 20
Silver Market - 22nd Oct 20
Goldman Sachs Likes Silver; Trump Wants Even More Stimulus - 22nd Oct 20
Hacking Wall Street to Close the Wealth Gap - 22nd Oct 20
Natural Gas/UNG Stepping GAP Patterns Suggest Pending Upside Breakout - 22nd Oct 20 -
NVIDIA CANCELS RTX 3070 16b RTX 3080 20gb GPU's Due to GDDR6X Memory Supply Issues - 22nd Oct 20
Zafira B Leaking Water Under Car - 22nd Oct 20
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

China Using Government Muscle to Turbo Charge its Auto Industry

Companies / China Stocks Sep 03, 2010 - 06:49 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleJason Simpkins writes: Having already supplanted the United States as the world's largest auto market, China is on the fast track to becoming the global leader in hybrid and electric cars.

General Motors and Chrysler were forced into bankruptcy largely because they failed to pursue more fuel-efficient models. Indeed, GM and Chrysler looked wholly unprepared as gas prices soared over $4.00 a gallon in 2008.


As GM emerges from bankruptcy - having been bailed out by the U.S. government - it will put a renewed focus on alternative energy. Unfortunately, it's too late to make a difference. As U.S. car companies sputtered amid the country's economic collapse, carmakers in China raced ahead. And with billions of dollars in government backing, they are the companies that will set the pace for the global auto market.

China topped the United States in auto sales for the first time ever last year, with 13.6 million vehicles sold. Roughly 10.4 million light vehicles were sold in the United States in 2009 - the lowest total since 1982 and a 21% decline from 2008. China last year sold more cars than the United States in every month except for August when the popular "Cash-for-Clunkers" program bolstered U.S. sales.

That trend has continued this year. China's vehicle sales surged 30.45% in the first half of the year to 7.18 million units, compared to 5.6 million for the United States. Industry-wide vehicle sales in China could reach 16 million this year, but not without a little help from the government.

After leaping 63% in March, China's auto sales dropped slightly below par in June and July, increasing by 19.4% and 17%, respectively. That's strong growth, certainly, but not "China strong." So, Beijing offered a spark by renewing a $443 (3,000 yuan) subsidy for vehicles that save 20% on fuel consumption.

Auto sales surged 55.7% in August to 1.21 million vehicles, in part because of the stimulus measure, but Beijing didn't act purely in the interest of boosting sales. China is more interested in promoting hybrid and electric cars than it is in boosting sales.

"The tone of policies is not to boost the already-rapid growth" in the auto industry, Jenny Gu, a Shanghai-based analyst at J.D. Power and Associates, told AFP. It's to encourage purchases of "green" cars.

To that end, many local governments also offer clean car incentives in addition to the central government subsidies. Shanghai, for instance, offers an extra $2,946 (20,000 yuan) to customers who buy a plug-in hybrid and $7,465 (50,000 yuan) to those buying electric cars.

Shanghai aims to produce 100,000 green vehicles a year by 2012, as part of its initiative said Liu Jianhua, head of the city's new-energy promotion. The city will build 400 charging stations for electric cars this year.

Tactics like these have been effective in getting China's freshly minted drivers to go green.

A survey of 606 auto buyers in Shanghai found that 75% of respondents intended to buy a green car within three years, according to a report from research firm Ipsos.

The same proportion of responders expressed buying interest in another poll of 1,478 vehicle owners and potential buyers nationwide, according to Nielsen. Respondents cited low operational costs and environmental benefits as their reasons.

Indeed, Beijing's goal isn't just to boost auto sales - a rapidly growing middle-class of more than a billion strong already ensures growth. In Beijing alone, a city of 20 million, the total number of vehicles is expected to hit 7 million by 2015. The number of vehicles in Beijing has increased by 1,900 a day on average in the first six months of this year.

The government's real goal is to build a domestic auto industry around fuel-efficient vehicles, and to have its state-run auto companies take the lead globally. And it's taking proactive steps to ensure that it happens.

Putting the Pedal to the Metal
China's State-owned Asset Supervision and Administration Commission (SASAC) last month announced that 16 state-owned companies would form an alliance to research, develop, and produce electric and hybrid cars. Beijing will invest as much as $15 billion (100 billion yuan) in the venture by 2012.

SASAC, which oversees 125 of the country's biggest state-owned companies, said the alliance of state-owned enterprises was formed with about $200 million. It includes two of the nation's biggest car companies, - China FAW Group and Donfeng Auto - as well as its top three oil majors, its top two power grid operators, and military and aviation companies.

"This is the kind of plan the government would like to happen, and they certainly have the resources to put behind it," Oded Shenkar, a professor of management at Ohio State University and the author of "The Chinese Century," told The New York Times. "The government could easily underwrite or subsidize the development cost, and do it at a time when the global car industry is still reeling."

Beijing will divide the funds between the development and commercialization of fuel-efficient powertrains ($7.5 billion, 50 billion yuan), demonstration programs ($4.5 billion, 30 billion yuan) and creating a charging infrastructure ($800 million, 5 billion). It also will provide funding to 3-5 vehicle manufacturers and 2-3 battery and electric motor suppliers.

The plan aims to put 500,000 energy efficient vehicles on the market each year over the next three years. Electric and hybrid cars will soon account for 5% of the country's passenger car sales, the government said.

"What you have here is the confluence of two important things," said Shenkar. "The car industry was long ago designated as a pillar industry for China. And the second thing is green technology or high tech; this is where the action is going to be, and China wants to be there."

That's why in addition to bankrolling the initiative, China's government also is locking up the resources to ensure its long-term green car dominance.

China's Mineral Monopoly
The production of high-tech devices like computers, smart bombs, and hybrid car engines require so-called rare earth metals. There are 15 different types of rare earth metals scattered across the globe and they are very difficult to extract. They are in increasingly short supply as world demand surges, with industry officials predicting a global shortfall of 30,000 to 50,000 metric tons by 2012.

However, China realized the importance of these metals early on and has invested heavily in extraction technology over the past two decades. The country now controls more than 95% of recoverable reserves.

This metal monopoly gives China a tremendous advantage when it comes to producing energy efficient vehicles. Terbium can cut the electricity demand of lights by up to 80% and fractions of dysprosium can significantly reduce the weight of magnets in electric motors. There are more than 50 pounds of rare earth metals under the hood of a Toyota Motor Corp. (NYSE ADR: TM) Prius.

And now that China has the chance to become a technological leader, it's suddenly concerned with keeping more of its rare earth minerals at home. The country has cut export quotas for rare earth elements by 72% for the second half of this year. That move caps foreign shipments at 7,976 metric tons, down from 28,417 tons for the same period last year.

The United States is looking into whether or not China is breaking World Trade Organization (WTO) rules by giving preferential access to domestic companies, but it's unlikely Beijing will budge. China claims it needs a growing proportion of these metals for its own industries and the nation's top producer, Inner Mongolia Baotou Steel Rare-Earth, plans to use 9% of this year's production to build a stockpile that could grow to 200,000 metric tons.

Japan has already drafted a "Strategy for Enhancing Stable Supplies of Rare Minerals," and Japanese Foreign Minister Katsuya Okada yesterday (Thursday) warned that China risks losing foreign investments unless it introduces more transparency and consistency into its business rules.

Regardless of these objections, however, China continues to hold the cards. And the Red Dragon fully intends to use all of its political capital to advance its objectives.

"In 2009, there was a huge expansion of the government role in the corporate sector," Huang Yasheng, a leading analyst of China-style capitalism at the Massachusetts Institute of Technology, told the NY Times in a telephone interview. "They're producing yogurt. They're into real estate. Some of the upstream state-owned enterprises are now expanding downstream, organizing themselves as vertical units. They're just operating on a much larger scale."

Source : http://moneymorning.com/2010/09/03/china-auto-industry/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules