Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Asian Automakers Are in the Driver’s Seat

Companies / Sector Analysis Jan 28, 2010 - 03:30 AM GMT

By: Tony_Sagami

Companies

Best Financial Markets Analysis ArticleThe funeral list of industries that have dared to compete against low-cost Asian competitors is long and getting longer. Just ask anybody in the textile, furniture, footwear, electronics, steel, clothing, or TV industry.

You’ll be able to add the automobile business to that list in the near future.


According to automaker watchdog Autodata Corp., Asian automakers now own 47.4% of the global auto market while the General Motors, Ford, and Chrysler have seen their market share shrink to 44.9%.

To put that in historical perspective, the Asian automakers only had 18% of the car market and the Big Three American carmakers hogged more than 75% of the market in 1980.

The Big Three Detroit automakers made mistake after mistake. The first stumble was their reliance on big gas-guzzling sedans whose sales were crushed from the oil crisis of the 1970’s and then again when $4 a gallon gas ruined the American love affair with 2-ton SUVs and full-size trucks.

The Big Three got a temporary reprieve from the Obama administration in the form of multi-billion taxpayer bailouts and Cash for Clunkers tax incentives … but those short-term Band-Aid fixes won’t change the underlying problem that the cost of building cars in Asia is simply much, much lower.

The Big Three sees the handwriting on the wall and that is one of the reasons they are so eagerly trying to convert themselves into Asia-centric sales companies. General Motors, for example, bragged last week that it expects to sell 2 million vehicles in China in 2010. GM did sell 1.83 million cars in China last year, making it the largest foreign car company in China.

That’s a nice goal, but they won’t make it. First of all, the Chinese government cut the sales tax on cars last year from 10% to 5% along with $732 million of their own version of Cash for Clunkers tax incentives will soon expire.

U.S. automakers can't keep up with the Asians in developing fuel-efficient hybrid and electric cars.
U.S. automakers can’t keep up with the Asians in developing fuel-efficient hybrid and electric cars.

More importantly, the U.S. automakers are woefully behind the Asians on developing the next generation of green, fuel-efficient hybrid and electric cars. The reason is that American automakers are more driven by government policy than consumer needs.

The Obama administration and the Department of Energy have set aside $30 billion of stimulus money for green energy programs, tax credits, and grants. Plus, the looming federal mandate to increase fleet fuel efficiency to an average of 35 miles per gallon by 2016.

The Asian carmakers, by contrast are way ahead technologically and in sales.

arrow Asian Automakers Are in the Driver’s Seat  The Toyota Prius is the best selling hybrid in the world by a wide margin and is kicking the stuffing out of our Big Three. Toyota expects to sell 180,000 of the 50-mph Prius.

Toyota (NYSE:TM)

Honda (NYSE:HMC)

BYD Corporation (Hong Kong: 1211.HK)

Nissan Motors (OTC:NSANY.PK)

Tata Motors (NYSE:TTM)

Hyundai (Korea:5380.KS)

arrow Asian Automakers Are in the Driver’s Seat  Business is so good at Chinese carmaker BYD Corporation that it just raised its 2010 sales forecasts from 700,000 to 800,000 as it prepares to roll out its first ALL electric car, the E6. BYD’s F3 hybrid sedan was the best-selling car in China in the first 11 months of this year.

arrow Asian Automakers Are in the Driver’s Seat  BYD is building two new factories, one in the central Chinese city of Changsha and in Xian, the home of the terra cotta warriors. For subscribers to my Asia Stock Alert, you may remember the Chinese government’s Go West priority and the prosperous impact on Xian. This new plant is just another reason why I am so optimistic about the three Xian-based companies that we own. Warren Buffet, by the way, owns 10% of BYD.

arrow Asian Automakers Are in the Driver’s Seat  Honda has a lineup of fantastic hybrids: Honda Insight, Accord Hybrid, Civic Hybrid, CR-Z Hybrid.

arrow Asian Automakers Are in the Driver’s Seat  Should you invest in an Asian car maker? The quick answer is that I think you could do well with any one of them over the long-term, particularly Toyota, which is the one company that is doing well all over Asia. Wherever I go in Asia — Jakarta, Bangkok, Tokyo, Beijing, Singapore, Guangzhou, Bangalore, Taipei — I see Toyotas. I can’t say that about any other car company.

However, I have never been a big fan of any industry that requires a regular stream of multi-billion capital improvements. Industries that require huge capital outlays — such as airlines, steel mills, and automakers — typically have low return-on-equity rates and are usually burdened with large amounts of debt to finance those billion dollar spending sprees that make them especially vulnerable to economic downturns.

That is why I would suggest that there are better ways to profit from the booming Asian auto markets. Instead of investing in the car makers directly, who are going to be killing each other to come out with the best “green” cars, you could instead invest in the companies that make the batteries that go into the cars.

A better way to play the booming Asian auto markets is investing in car batteries.
A better way to play the booming Asian auto markets is investing in car batteries.

Levi Strauss made a fortune by selling dungarees to the hoards of prospectors during the California Gold Rush and some battery makers are going to make fortunes by selling to the new wave of green transportation prospectors.

Like the auto business, the battery business is dominated by Asian companies such as China BAK Battery (Nasdaq:CBAK), Advanced Battery Technologies (Nasdaq:ABAT), China Ritar Power (Nasdaq:CRTP), and Hong Kong Highpower Technologies (Nasdaq:HPJ).

To be fair, I should disclose that my Asia Stock Alert subscribers already own China BAK Battery. It has opened a new factory in Tianjin, China with the Chinese government’s backing and has plans to open a third factory in India. It is building all that production capacity for one reason and that it expects gangbuster business from the auto industry.

Lastly, if you happen to own any Ford or DamilerChrysler shares … dump it as fast as you can. That also goes for any mutual funds. Hartford Capital Appreciation, Janus Overseas, CGM Focus, New Perspective Fund, and Vanguard Wellington are loaded with Ford shares.

Best wishes,

Tony

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.


© 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