One of the most lucrative auto markets across the globe, China, has consistently helped European car makers in churning out excellent profit figures. Despite unpredictable market conditions, Volkswagen (VW) and Bayerische Motoren Werke (BMW) released several models for the Chinese audience. However, experts have given warning signals to European car makers regarding threats in 2012. With these signals, industry experts suggest automakers to be cautious in their approach and prepare themselves for decline in sales.
China, a productive arena for automakers, has raised hopes of foreign car manufacturers by exhibiting phenomenal success for them in recent times. This is in stark contrast to other markets, where demand was restricted mainly due to the rise in sovereign-debt in Europe. As a consequence, these car makers are banking on this high-potential market, especially in the wake of the global economic slow down.
Volkswagen AG's core brand, VW, sold 430,800 vehicles last year, registering 10.4 per cent rise in sales and maintained a bullish trajectory. In a recent press meeting, sales chief of Volkswagen Group China, Christian Klingler expressed contentment regarding the sales of the last quarter. However, he also hinted that the company is scrutinising current developments in order to secure its immediate future.
Another European car maker, BMW, seems impressed with the market potential and considers China to be one of the strongest markets for its 3 Series range. BMW AG confirmed growth of 8.3 per cent for BMW, Mini and Rolls-Royce brands in 2011 till now, selling a total of 139,276 units in the month of October 2011. Moreover, BMW brands collectively registered 15 per cent rise in sales, rolling out 1.37 million cars worldwide in the first 10 months of 2011. Sales chief Ian Robertson said that the company wants to capitalise on the strong market conditions and are positive of selling 1.6 million units to record all-time high sales figures in 2011.
The bullish phase also facilitated Daimler AG's Mercedes-Benz unit, which registered 3.1 per cent growth in sales over the last year. On the other hand, the combined sales figures of Mercedes-Benz, Smart and Maybach brands cars saw a rise of 6.9 per cent. Taking into account sales volumes of October 2011, Volkswagen's Audi confirmed a 24 per cent rise in sales, when it sold 108,500 cars.
Referring to the future of Chinese car market, well-known Sanford Bernstein analyst Max Warburton said there lies a great degree of uncertainty in automotive market of China as the sector is struggling across the globe. He forecasts that the sector will see a 40 per cent decline sales as well as earnings expectations. According to him, the Chinese market will see a 20 per cent fall in car demand in 2012 as compared to a 10 per cent increase in the previous year. He further added earnings forecasts for German manufacturers are based on guesses. Similar reactions regarding the worsening situation were given by financial institutions like J.P. Morgan, Barclays and HSBC earlier.
Going by the unfamiliar behaviour of Chinese car market and forecasts of experts, persistent economic uncertainties across the globe are expected to impact and alter the approaches of European car makers in China. Due to investment risk, the Chinese market for European car makers will certainly be witnessing many changes in forthcoming year.
