Chinese auto market
Currently, China is the largest auto market in the world by sales volume. While the market is dominated by local automakers, it still has great growth potential for other large global auto companies. As a result, global auto companies (XLY) including Ford (F), Volkswagen (VLKAY), Fiat Chrysler (FCAU), and General Motors (GM) have shifted their focus to the Chinese market lately. Let’s review these automakers’ 2Q17 performance in China.
General Motors in China
In 2Q17, General Motors’ sales volume in China rose 1.6% to ~852,000 units. The positive growth was mainly driven by higher demand for Baojun and Cadillac brand vehicles along with positive YoY (year-over-year) growth in demand for other utility and luxury vehicles.
In fiscal 2016, General Motors reported a handsome increase of 257,952 units in Chinese sales in its retail segment. The retail sales gains were also driven by the higher demand for sports utility vehicles and luxury vehicles in the country.
Ford and Fiat Chrysler’s performance
Ford’s vehicle sales rose in China due to higher demand for its Lincoln brand. Being a luxury brand, Lincoln’s higher demand also helped the company boost its profit margins from China. Luxury vehicles tend to yield higher profit margins for automakers compared to other mass market vehicles.
During its 2Q earnings conference call, Ford’s management mentioned that the company expects its fiscal 2017 profit margins to rise YoY.
Fiat Chrysler also reported a 2% YoY increase in its Asia-Pacific revenues, while its sales in China remained weak. Fiat Chrysler cited its recent move to localize Jeep brand vehicle production in China through its joint ventures as a reason for its subdued performance in 2Q.
In the next part, we’ll compare automakers’ 2Q17 margins and profitability.