PHOTO CAPTION: Shanghai GM plant producing Buick models.

China Car Market Cooling

Global over-supply concerns growing, forecasts Alva Group, UK-based industry analysts.

Published: 13-Sep-2010

London, UK -- Growth in the Chinese automotive sector is slowing, and this is having an effect on global manufacturers concerned with oversupplying the market. As more and more western carmakers have already established production bases in the country it now looks as though the days of 40% - 50% increases in growth are now over. Alva predicts that manufacturers will look to other emerging markets such as Latin America to offset possible negative effects of slowing China sales.

In terms of the sector’s reputation, August was dominated by first half year results, with sales and corporate issues accounting for 42% of the issues coverage in total. Both the US and Europe posted a downturn in sales across the board, in line with Alva’s predictions. Government support for low carbon technology as well as consumer engagement and education from manufacturers over the benefits of this technology will be the key to a recovery in these markets. It is anticipated that sustainability (6%) will become an increasingly important topic in the coming months.

The outlook for the rest of the year looks poor; Alva anticipates worsening figures due to the end of government incentives as well as low consumer confidence and rising raw material costs.

“With first half year results out of the way, attention will return to the two main themes of emerging markets and low carbon technology,” said Alberto Lopez-Valenzuela, CEO of Alva. “The latter will be boosted by the forthcoming Paris Motor Show in October, which will likely focus heavily on Electric Vehicles, causing an increased interest in the technology.”

General Motors (GM) overtook Toyota as the most prominently discussed manufacturer in August (22% to 12% respectively), largely due to discussion around its Initial Public Offering filing (7%) and its recall of 250,000 cross over vehicles due to defective seat belts (2%). There are many concerns surrounding GM’s IPO, with the company’s recent change in management and its poor consumer reputation for safety and quality presenting major risks to the potential success of the offering.

“It cannot be stressed enough how significant GM’s IPO is to the future success of the company,” said Alberto Lopez-Valenzuela, CEO of Alva. “Management of all GM’s stakeholders, but especially shareholders, investors, financial analysts and the general public is vital to improve GM’s reputation and drive up the value of its stock price ahead of the IPO.”

Each month, corporate reputation analysis company Alva reports on the biggest reputational risk issues in the Automotive sector using information collected from its proprietary analytics tool.

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