Reading The Chinese Tea Leaves: April Market Not As Strong As It May Appear

News of strong April results of key players in the world's largest auto market China may indicate than China's rest and recuperation period is over. SAIC's auto sales are up 12.6 percent, says Reuters.  GM reports record sales from China, up 11.7 percent for the month. Toyota told Reuters that its April sales in China were up a whopping 68 percent.  Is the Middle Kingdom turning the corner to another episode of hyper growth? Let's take a look. The Toyota jump is easy to explain. Toyota's spokesman Takanori Yokoi conceded to Reuters that "the large year-on-year jump in April sales was due chiefly to the fact that sales during April last year were comparatively low because of the massive earthquake on March 11." For the same reason, Yokoi predicts double digit growth for the next several months.  For the first four months of the year, Toyota's China sales are up 14.3 percent. Apr '12 Apr '11 YoY Shanghai GM 94,101 96,219 -2.2% Buick 54,013 53,085 1.7% Chevrolet 41,555 44,292 -6.2% Cadillac 2,048 2,550 -19.7% SAIC-GM-Wuling 127,362 100,262 27.0% Wuling 117,829 96,581 22.0% Baojun 6,018 NA NA FAW-GM 5,141 6,470 -20.5% The case of GM China is a bit trickier. GM's incurable penchant for spinning numbers and omitting key metrics when they get inconvenient, requires a closer look and some Excel work. Blue numbers in the table had to be retrieved from the archives, or recalculated. GM's core China business, a.k.a. Shanghai GM, actually was down 2.2 percent in April, mainly caused by a 6.2 percent drop of Chevrolet. Buick was up slightly. Cadillac sales dropped 19.7 percent, a fact GM's press release shamefully omits. Shanghai GM's losses are glossed over by a jump in Wuling sales, where GM holds a minority interest. A resurgence of the commercial sector is a positive indicator. Higher unit sales of low cost delivery vans at minority-held Wuling however cannot make up for losses in the upper brackets. SAIC sales must be carefully scrutinized, because they contain both joint venture and own sales.  SAIC reports a 0.1 percent drop in its JV with GM, and a 10.2 percent gain in its JV with Volkswagen.  This, and a report that Audi's China deliveries jumped 44 percent in April, indicates a continuation of Volkswagen's strong showing in China. Official Volkswagen Group data are not yet available. The Audi data are a blend of cars made locally in a JV with FAW, and imported cars. All in all, April sales in China will likely be in the positive region when they are reported some time this week. I do not expect them to jump as high as these early data make believe. from The Truth About Cars http://www.thetruthaboutcars.com

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