The auto industry is back on its feet again, following some lean years during the recession in 2008 when General Motors Company (NYSE/GM) had to be saved by the government. And whether you agreed with General Motors (GM) being bailed out or not, the reality is that the company has rebounded via massive restructuring and better leadership with a stronger vision of where the company should be headed. Moreover, GM now employs over 210,000 people, which may not have been the case if the automaker had been allowed to fail.
GM is now a $50.0-billion company, and while it is no longer the stock market leader in its backyard, the company has been able to grow a very healthy and viable business in China, where GM is the country’s top foreign automaker. Apparently, the Chinese love their GM vehicles and associate the brand with prestige and quality. (Imagine that! Maybe Americans are missing out…)
Chart courtesy of www.StockCharts.com
For GM, China was the path to recovery. The country has invested billions of capital into the world’s largest auto market and so far, it has paid off.
In fact, GM now sells more vehicles in China than domestically. In the first half of 2013, GM and its joint partners sold a record 1.57 million vehicles, up 10.6% year-over-year, according to the company. Sales in China exceeded the 1.4 million GM vehicles sold in the United States. Now, you can say that China actually helped to save GM from the salvage yards.
The auto market in China is potentially enormous, and its growth will be largely dictated by government policies towards growth and the impact on pollution. A major issue for foreign automakers is the current move by the government to restrict the amount of cars on the road, as the country works to figure out how to best control its pollution issues. In the massively populated super cities of Shanghai and Beijing, there is currently a lottery system to buy vehicles.
Yet regardless, China will likely continue to be the top growth market for foreign automakers going forward. This will be especially true in the rural areas where car ownership is extremely low. So as the income levels rise, look for the car demand to rise accordingly.
The consensus growth estimated for China is around 10% across the board, which is pretty good, given the slowing that surfaced in 2012.
So if you want to play the Chinese auto market, consider taking a look at GM, along with other key foreign automakers, such as Ford Motor Company (NYSE/F) and Toyota Motor Corporation (NYSE/TM). I even heard auto upstart Tesla Motors, Inc. (NASDAQ/TSLA) is looking at expanding its sales network to China, which could be mind-boggling as far as potential goes. (Read “Consider This Surging Automotive Company.”)
This article Where to Find the Best Potential Growth in the Automotive Industry is originally published at Profitconfidential
