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April 27, 2010

COMMENT: Asia points the way

Today's decent results from Japanese giants Mitsubishi and Mazda reflect an increasingly optimistic current of opinion among mass producers.

Today’s decent results from Japanese giants Mitsubishi and Mazda reflect an increasingly optimistic current of opinion among mass producers.

The wave of optimism gushing from this week’s Beijing Auto Show as manufacturers scrambled to outdo each other in the good news stakes comes as welcome relief – but with myriad caveats.

Mitsubishi for example posted a decent fiscal 2009 profit, but had to climb a mountain just to get into the black compared to the previous year’s global detritus.

Equally, retail sales volume dropped 10% or 106,000 units – not disastrous given its breezy forecast for this year of global sales rising 17% to 1.1m vehicles – but its period of uncertainty is by no means over.

Mitsubishi ‘s home turf of Japan recorded very slight improvement, while sales in those traditional stalwarts, Europe and the US fell 38% and 26% respectively.

And as for Russia, well just about every manufacturer has reported precipitous falls that will take some considerable plugging.

Mazda also turned in marginal growth in its home market, while posting North American and European falls of 12% and 26%, with Russia again acting as a significant drag on performance.

But for both automakers, it is territory closer to home that representatives a potential great leap forward.

Mitsubishi and Mazda have recorded sparkling results in China where retail and unit volume has soared 64% and 46% respectively as the the market once viewed as the panacea for all ills once again shows its latent muscle.

The puzzle for overseas and domestic producers in China is how to start ratcheting those – currently modest – sales numbers up into figures that start to reflect the ratio of population and increasing GDP.

That’s not going to be an overnight process, but it is starting to bear fruit, particularly for those automakers prepared to produce locally and engage with Chinese cultural demands.

And of course coupled with a seemingly insatiable appetite for quality models.

Hong Kong has long been the Asian epicentre of Rolls-Royce ownership – even though you can barely use the machines as they were intended – but a trickle-down effect across the Chinese economy of improving living standards and a brand-hungry population can only aid manufacturers.

Other Asian markets are also performing – on the whole – significantly better than they have been – while China is being eyed as increasingly competitive base from which Western manufacturers can to export to South East Asia.

There is of course the no-small matter of a global economy, rising from its knees. The raft of good news coming – not just from the Beijing from automotive powerhouses across the world is overwhelming.

But the numbers come hard on the heels of a frankly disastrous couple of years, the like of which barely anyone alive can remember. Small acorns and all that.

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