Financial, Economic and Social Mood Update (April 2, 2019)
In the March 2019 blog we discussed more important topics about the global vehicle manufacturing industry, about valid worldwide environmental quality concerns which need to be addressed and about the pitfalls of succumbing to the highly destructive ideology of socialism.
Global new vehicle sales peaked at 95.2 million units in 2017 and declined to 94.2 million in 2018. Much the same happened in the USA, which is the second largest national market after mainland China. The makeup of this market has changed dramatically over time. The dominance of the American companies reached a peak in 1947, when they held 92 percent of global unit sales (50 percent belonged to General Motors alone). How things have changed in the 72 years since then! Today, companies headquartered in Asia have 56 percent of the global market. European companies have 37 percent and US companies have a mere 7 percent. Automotive companies are divided into “groups” (which describes equity ownership) and sometimes into “alliances” which describes cooperation in the areas of manufacturing, sharing of common platforms & parts, and in marketing agreements for various parts of the world market. The largest player today both in terms of unit sales / market share and in terms of capital is the Volkswagen Group (and an alliance above and beyond just the group).
The Volkswagen Group (headquartered in Wolfsburg, Lower Saxony, Germany) owns the active brand names of Volkswagen, Audi, SEAT, Skoda, Bentley, Lamborghini, Bugatti, Porsche, Scania, MAN, NEOMAN Ducati, CUPRA and Italdesign Giugiaro as well as the Karmann coachbuilding company. VW is also the major joint venture partner of SAIC Motor of China (Shanghai Automotive Industry Corporation). The VW Group manufactures 10.8 million vehicles per year. SAIC is number one in China, with annual sales of 6.9 million units. The SAIC-Volkswagen Automotive, Limited joint venture sells 1.7 million cars per year, including both Skoda and Volkswagen models. The VW Lavida, VW Lamando, VW Santana, VW Passat and VW Tiguan are all exported to ASEAN countries including the Philippines. Other SAIC Motor brands include Maxus, Yuejin, MG Cars and Roewe (formerly Rover of England). MG Cars (another formerly English company) is the export market arm of Roewe, selling cars worldwide under the MG brand name.
VW recently formed a global alliance with the Ford Motor Company of Michigan. Ford (which includes the brand names of Ford and Lincoln) is still very active in the USA and Africa, but in most other global markets Ford will contribute to the VW truck lineup. Volkswagen Commercial Vehicles is headquartered in Hanover, Lower Saxony in Germany and is well known for products such as the Volkswagen Transporter Bus (now in its 6th generation), the Volkswagen Transporter Panel Van, the Volkswagen Transporter Pickup Truck, The Volkswagen Transporter Camper, The Volkswagen Crafter (built on the same platform as the Mercedes-Benz Sprinter), MAN trucks, Scania trucks and large commercial trucks with the VW nameplate sold in both Europe and South America. The contribution by Ford will come in the way of light trucks such as pickup trucks which will replace the next generation Volkswagen Amarok. Ford sells 6.6 million vehicles per year worldwide, and the largest Ford franchise in the Philippines (as well as the largest Ford dealership in Asia) is owned by Reynes de Borromeo Business Group of Cebu City. Volkswagen Philippines is represented by the Zobel de Ayala Business Group of Makati, which also owns the Philippine franchises for Honda Cars and Mitsubishi Cars. The Mitsubishi Keiretsu of Japan has 2 seats on the Board of Directors of the Ayala Corporation (the oldest Philippine corporation founded in 1834).
Yet another large joint venture partner of the Volkswagen Group in China is FAW (First Automobile Works founded in 1953). FAW manufactures 2.7 million vehicles per year under brand names including Besturn, Freewind, Haima, Hongqi, Jiaxing, Jie Fang, Vita and Xiali. FAW oldest joint venture is with the Volkswagen Group. Models built by the venture include the Audi 100 Sedan and the VW Magotan Sedan (a 7th generation VW Passat).
GAZ of Russia is yet another VW partner – this is a smaller company which makes 87,000 vehicles per year under the “Volga” brand name. The VW Group has a 16.6 percent equity interest in Navistar International of Illinois which makes 65,000 large trucks per year under the “International” brand name. The VW Group brands and other companies allied to the VW Group control 29 percent of the global vehicle market.
The runners up include the Geely alliance of China (19 percent of the world vehicle market), Honda of Japan (14 percent), Toyota of Japan (10 percent), Hyundai of Korea (7 percent), General Motors of the USA (7 percent), Peugeot of France (6 percent) and Suzuki of Japan (5 percent). The only one here which needs a description is Geely of China. Their story is one of a relatively rapid rise to the heights of the FORBES list and very impressive success in the world of business. Geely was founded by Mr. Li Shufu (born June 25 1963) with borrowed money as a refrigerator manufacturer in 1986 – a mere 33 years ago. He soon expanded into making other inexpensive products for Chinese consumers. He started making motorcycles in 1995, small vans by 1998 and his first passenger car by 1999. He launched his first IPO on the Hong Kong stock exchange by 2004. Geely first partook in the Frankfurt Motor Show in 2005 and the Detroit Auto Show in 2006. “Geely” translates to “auspicious” or “lucky” from Mandarin Chinese. Geely purchased Volvo Cars of Sweden from the Ford Motor Company in 2010. Unit sales in 2010 were 415,000 passenger cars. Geely commenced auto exports to the UK and Italy in 2012. Geely agreed to purchase a majority stake in Lotus Cars of the UK from Proton Holdings of Malaysia in 2017, as well as a 49.9 percent stake in Proton (Proton was once related to of Mitsubishi of Japan). Another purchase in 2017 was of Terrafugia, an American manufacturer of flying cars. Before the end of 2017 Geely became the largest shareholder in the “Volvo Group” (a commercial truck manufacturer which owns the truck brands of Volvo, Mack, Dongfeng and Terex) and in 2018 they became the largest shareholder in Daimler-Benz of Germany, which owns the brands of Mercedes-Benz, AMG, Smart, Detroit Diesel, Freightliner, Western Star, Thomas, Setra, Mitsubishi Fuso, MV Augusta, Maybach, AIG, Denza, KAMAZ and Beijing Automotive. Geely’s stake in Daimler-Benz gives them alliance relationships with RenaultNissan B.V. (Renault, Nissan, Mitsubishi, Dacia, Samsung, Lada and Datsun) as well as with Tesla of California.
