Car Talk: The China edition
Warren Buffett (front passenger) and Bill Gates (behind driver) arrive on stage at the electric vehicle BYD M6 nationwide launching ceremony in Beijing on September 29, 2010.
In automotive circles, China has been all the rage the past few years.
It's easy to see why: a growing middle class of consumers, combined with a booming infrastructure, plus an increasing supply of cheap cars, has turned China into the world's largest market for automobiles.
Chinese are expected to buy an estimated 18 million vehicles this year. That's more than the U.S. and Europe (both at around 14 million), and more than three times the number in Japan.
That rosy road has even attracted the likes of Warren Buffett, whose Bershire Hathaway empire in 2008 bought a 10 percent stake in Chinese automaker BYD.
But as the Economist points out in its latest edition, BYD (who's letters are thought to mean "build your dreams") is having some trouble.
The company has experienced delays on two of its forthcoming hybrid models, and growth is beginning to stall.
Here's how the Economist puts it:
Although last year’s total sales were up 18 percent on the previous year, they were well below the 700,000 to 800,000 cars that the firm had been expected, at one point, to shift. The Chinese market as a whole grew by one-third. And the real bad news may be to come. Mr Laprise (a stockbroker at CLSA) reckons BYD’s sales will drop from 525,000 in 2010 to 425,000 this year, a shocking decline for a big Chinese carmaker and a stunning blow for what had been widely considered to be one of the country’s bright lights.
Meanwhile, back in Detroit, the picture appears to be improving this year, thanks to some pretty cheap deals and a slight improvement in the U.S. economy.
February auto sales jumped 27 percent from a year ago, beating all expectations. That number, which came out earlier in March, was the strongest demand for autos in the U.S. since 2009, when the government enacted its "cash for clunkers" incentive program.
GM and Toyota are tops in sales so far in 2011, with Nissan right behind. GM and Nissan are leading the industry in total amount of incentives, while Toyota's numbers are still bouncing back from last year's quality control debacle.