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Global Auto Horizons
March 2011 - Aftershocks
Our highlighted research piece this month (p.4) is Macquarie Japan auto analyst
Clive Wiggins’ lucid summary and discussion of the impact of the Sendai
earthquake on Japan’s auto industry. The other members of the global auto
team comment on the impact on the supply chain outside Japan.
Our views by market
China: Still positive. Top pick: Great Wall. We expect March sales to pick up as
OEMs and dealers push sales at the quarter end and the re-stocking process
continues. We acknowledge some uncertainties from rising fuel prices and
macro tightening conditions, but we maintain our forecasts of 14% YoY growth
for the passenger vehicle (PV) sector driven by strong underlying demand from
non-major cities. We think the greatest risk of negative impact from the
earthquake is at GAC and in relative terms Dongfeng especially.
Europe: Raising numbers. Top pick: BMW. We continue to expect a weakening
of the SAAR for the Western European market over the months to come, but on
the back of the better than expected start to 2011, we lift our 2011 forecast for
the Western European light vehicle market to 14.38m (+0.2% YoY vs -1.4%
previously). Peugeot Citroen is having problems sourcing electronic parts, but for
most suppliers, there has been no significant impact from the Japan earthquake
yet. Production seems secure for two weeks but there is widespread concern
about smaller suppliers.
India: Cautious. Top pick: Tata Motors. So far in FY11, we note car sales have
been supported by low interest rates but RBI’s expected move to increase policy
rates could dampen demand for cars, the majority of which are purchased using
financing. Price hikes by OEMs and impending fuel price hikes could increase
car ownership cost. The quake is unlikely to inflict major damage on Indian
OEMs though we think Maruti Suzuki may be vulnerable if stoppages continue.
Japan: Damage assessment mode. Top pick: Toyota. We expect the Sendai
earthquake to affect first demand, then supply. We expect sales activity in the
Tokyo area, which has by far the largest population concentration in the country,
to have been hit by fears related to the nuclear disaster and rolling blackouts in
the region. Supply issues are still only just beginning to be understood and we
expect these to be an even greater constraint from April.
Korea: Positive. Top pick: Hyundai Motor. We expect limited damage from the
quake as Hyundai Auto Group sources less than 2% of its auto parts from Japan
and has already started substituting Japan auto parts for other makers. We
expect strong Korean sales figures in March 2011.
United States: Watchful. The sales trajectory in the US until recently has looked
fairly solid in our view, but there are a number of clouds on the horizon: quakeinduced
supply shortages, rising petrol prices and a worsening housing outlook.
Keeping track
In February 2011, combined light vehicle sales in the seven major markets that we
track (the US, China, Europe, Japan, Korea, India and Brazil) came to 3.9m units
(+7.5% YoY). YTD sales have reached 8.2m (+7.9% YoY). March is normally a
seasonally strong month for these seven markets but we believe the Sendai
earthquake may hit sales in March 2011 and beyond if part shortages start to bite.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Global Auto Horizons
March 2011 - Aftershocks
Our highlighted research piece this month (p.4) is Macquarie Japan auto analyst
Clive Wiggins’ lucid summary and discussion of the impact of the Sendai
earthquake on Japan’s auto industry. The other members of the global auto
team comment on the impact on the supply chain outside Japan.
Our views by market
China: Still positive. Top pick: Great Wall. We expect March sales to pick up as
OEMs and dealers push sales at the quarter end and the re-stocking process
continues. We acknowledge some uncertainties from rising fuel prices and
macro tightening conditions, but we maintain our forecasts of 14% YoY growth
for the passenger vehicle (PV) sector driven by strong underlying demand from
non-major cities. We think the greatest risk of negative impact from the
earthquake is at GAC and in relative terms Dongfeng especially.
Europe: Raising numbers. Top pick: BMW. We continue to expect a weakening
of the SAAR for the Western European market over the months to come, but on
the back of the better than expected start to 2011, we lift our 2011 forecast for
the Western European light vehicle market to 14.38m (+0.2% YoY vs -1.4%
previously). Peugeot Citroen is having problems sourcing electronic parts, but for
most suppliers, there has been no significant impact from the Japan earthquake
yet. Production seems secure for two weeks but there is widespread concern
about smaller suppliers.
India: Cautious. Top pick: Tata Motors. So far in FY11, we note car sales have
been supported by low interest rates but RBI’s expected move to increase policy
rates could dampen demand for cars, the majority of which are purchased using
financing. Price hikes by OEMs and impending fuel price hikes could increase
car ownership cost. The quake is unlikely to inflict major damage on Indian
OEMs though we think Maruti Suzuki may be vulnerable if stoppages continue.
Japan: Damage assessment mode. Top pick: Toyota. We expect the Sendai
earthquake to affect first demand, then supply. We expect sales activity in the
Tokyo area, which has by far the largest population concentration in the country,
to have been hit by fears related to the nuclear disaster and rolling blackouts in
the region. Supply issues are still only just beginning to be understood and we
expect these to be an even greater constraint from April.
Korea: Positive. Top pick: Hyundai Motor. We expect limited damage from the
quake as Hyundai Auto Group sources less than 2% of its auto parts from Japan
and has already started substituting Japan auto parts for other makers. We
expect strong Korean sales figures in March 2011.
United States: Watchful. The sales trajectory in the US until recently has looked
fairly solid in our view, but there are a number of clouds on the horizon: quakeinduced
supply shortages, rising petrol prices and a worsening housing outlook.
Keeping track
In February 2011, combined light vehicle sales in the seven major markets that we
track (the US, China, Europe, Japan, Korea, India and Brazil) came to 3.9m units
(+7.5% YoY). YTD sales have reached 8.2m (+7.9% YoY). March is normally a
seasonally strong month for these seven markets but we believe the Sendai
earthquake may hit sales in March 2011 and beyond if part shortages start to bite.
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