More Bad News For VW AG
12-25-2018, 07:45 AM
#1
Club AutoUnion
Thread Starter
More Bad News For VW AG
THIS IS NOT A POLITICAL POST — PLEASE KEEP IT THAT WAY.
The headline in today’s Wall Street Journal:
Idle Hands in China Workshops as Foreign Car Makers Struggle With Zombie Factories
SHANGHAI—A downturn in China’s car market has wrong-footed some of the world’s biggest auto makers, saddling them with factories they no longer need and that are costly to retool.
It has gotten so bad that at one Peugeot factory, skilled workers spend their days washing floors or attending Communist Party political study sessions at work. At a Ford plant, workers’ shifts have been reduced to a few days a month, according to employees.
Now these auto makers face a painful dilemma: Abandon those big investments, or invest even more to turn around dying plants at an uncertain time in a crucial market.
“Looking back, it wasn’t the right choice” to build new factories, said Paul Gong, an auto analyst at UBS Group AG . “No one was willing to predict that they might ever lose market share in China.”
Pertaining to VW AG:
Volkswagen AG is building a 300,000-capacity EV factory in Shanghai, having opened three new Chinese plants for both EVs and gasoline cars in 2018 alone. Ford also plans to open an eighth China factory, with new JV partner Zotye Auto, that will be able to produce 100,000 electric cars a year.
Things are not looking Rosy in China nor for all the automakers who rushed in to capitalize on this opportunity.
Link (subscription may be required) to the full article — https://www.wsj.com/articles/idle-ha...d=hp_lead_pos5
The headline in today’s Wall Street Journal:
Idle Hands in China Workshops as Foreign Car Makers Struggle With Zombie Factories
SHANGHAI—A downturn in China’s car market has wrong-footed some of the world’s biggest auto makers, saddling them with factories they no longer need and that are costly to retool.
It has gotten so bad that at one Peugeot factory, skilled workers spend their days washing floors or attending Communist Party political study sessions at work. At a Ford plant, workers’ shifts have been reduced to a few days a month, according to employees.
Now these auto makers face a painful dilemma: Abandon those big investments, or invest even more to turn around dying plants at an uncertain time in a crucial market.
“Looking back, it wasn’t the right choice” to build new factories, said Paul Gong, an auto analyst at UBS Group AG . “No one was willing to predict that they might ever lose market share in China.”
Pertaining to VW AG:
Volkswagen AG is building a 300,000-capacity EV factory in Shanghai, having opened three new Chinese plants for both EVs and gasoline cars in 2018 alone. Ford also plans to open an eighth China factory, with new JV partner Zotye Auto, that will be able to produce 100,000 electric cars a year.
Things are not looking Rosy in China nor for all the automakers who rushed in to capitalize on this opportunity.
Link (subscription may be required) to the full article — https://www.wsj.com/articles/idle-ha...d=hp_lead_pos5
12-25-2018, 08:34 AM
#2
AudiWorld Member
Nikon1 I have always appreciated your posts, and I am not a VW AG fanboy, the Q5 is my first German car, (love it so far) so after reading the entire WSJ article it seems to me it barely mentions VW AG. Most of it talks about Ford, Hyundai and Peugeot missteps. With both Tesla and VW AG building EV plants in Shanghai it remains to be seen if those are a mistake. In the articles I read the Chinese auto downturn was explained partly by a change in financing options. Peer to Peer (personal lending of money to another outside a bank) lending options are being discouraged in favor of bank loans only. The lack of this financing option has slowed car sales.
Also some auto manufacturers chose poor business partners to sell their vehicles with in China, GM and VW did better, not so much Ford. Without being 'political', it is known that the Chinese people double down during good times, however US tariffs are a new thing to them and when faced with uncertainty they don't just slow down purchases, they stop entirely. Yes things in China well may get worse economically, they have created their own sort of bubble. At the same time in the next years car purchases in China are forecast to grow again. As our current federal government policies breed more uncertainty world wide, which is never good for business, and as we abandon our allies, China and other countries will move to fill in the vacuum. Happy Holidays to all, Dave
Also some auto manufacturers chose poor business partners to sell their vehicles with in China, GM and VW did better, not so much Ford. Without being 'political', it is known that the Chinese people double down during good times, however US tariffs are a new thing to them and when faced with uncertainty they don't just slow down purchases, they stop entirely. Yes things in China well may get worse economically, they have created their own sort of bubble. At the same time in the next years car purchases in China are forecast to grow again. As our current federal government policies breed more uncertainty world wide, which is never good for business, and as we abandon our allies, China and other countries will move to fill in the vacuum. Happy Holidays to all, Dave
Last edited by katzjamr; 12-25-2018 at 08:39 AM.
12-25-2018, 08:46 AM
#3
Club AutoUnion
Thread Starter
Well, 4 manufacturing plants in a country that is faltering cannot be good news. It just seems that most of the auto manufacturers have forgotten that for whatever reason, a full steam economy can run out of steam quickly and then it’s “Oh crap, what do we do now?”
I think your assessment is right — most of the world’s automakers jumped in too quickly. While it may have been the worlds fastest growing economy - there’s no guarantee that it will be boundless. As our stock market is showing — nothing keeps going up forever.
Thank You for your thoughtful response.
— John
I think your assessment is right — most of the world’s automakers jumped in too quickly. While it may have been the worlds fastest growing economy - there’s no guarantee that it will be boundless. As our stock market is showing — nothing keeps going up forever.
Thank You for your thoughtful response.
— John
12-25-2018, 09:48 AM
#5
AudiWorld Member
Join Date: Dec 2011
Location: Culpeper, VA
Posts: 68
Likes: 0
Received 0 Likes
on
0 Posts
My wife is from China and and recently became a US citizen. I have traveled extensively with my wife in China where I met her on a business trip. She is very bright and was lucky enough to go to excellent universities here in the US.
While not meaning to sound biased or slanted in my view, many "richer" Chinese like the status that an expensive car brings them.
While not meaning to sound biased or slanted in my view, many "richer" Chinese like the status that an expensive car brings them.
12-25-2018, 10:06 AM
#6
AudiWorld Senior Member
4 factories in a country the size of China is literally the definition of a "drop in a bucket". They have 4 times the population as the US and despite their recent economic slowdown the "consumer class" is still growing very rapidly. It may be a short term problem for some of these automakers and the ones with longer term issues were going to have them anyway due to other factors.
12-25-2018, 10:51 AM
#7
China has been fudging their numbers for a very long time. Reality had to strike at some point.
Look up "China ghost cities". It's a fascinating look at how China makes itself look like it's growing.
Look up "China ghost cities". It's a fascinating look at how China makes itself look like it's growing.
Trending Topics
12-25-2018, 11:55 AM
#8
Club AutoUnion
Thread Starter
4 factories in a country the size of China is literally the definition of a "drop in a bucket". They have 4 times the population as the US and despite their recent economic slowdown the "consumer class" is still growing very rapidly. It may be a short term problem for some of these automakers and the ones with longer term issues were going to have them anyway due to other factors.
The article I posted had very little to with China — outside of that’s the economy where VW has invested in Capital Expansion. I was not trying to paint China in a negative light — as I stated at the very top of my post, it’s not any kind of political statement at all. It’s just highlighting a situation that is occurring in China. And the point of the WSJ article was just the fact that a group of multi-national automobile manufacturers appear to have misjudged their ability to sell cars within mainland China by manufacturing in Mainland China.
On a forked path — Apple is having the same problems growing their smartphone market share in China — despite the fact that the iPhones are manufactured within China. Yes — I realize that Foxconn is in a situation regarding import / export rules of products manufactured there for export and that those same iPhones ha e a very hefty import duty to the Chinese consumer.
If if you have been watching your 401k plans you know they are taking a beating on the fear (realistic or not — that’s well above my intelligence level) that the world economy is slowing down.
Getting back to the article, it certainly seems that Ford is in deeper red ink as far as their situation. But VW AG is still recovering from their own financial difficulties over the emissions testing “gate” as well as much of Europe tightening all emissions testing.
Again — this thread was just an FYI for anyone owning a VW AG product. Just an interesting (at least to me) article I saw in the WSJ.
Thank you
— John
12-25-2018, 12:10 PM
#9
Club AutoUnion
Thread Starter
I’m not judging / just smiling at this “Wearing My Wealth” for all to see.
As for me & my S5 — it fit my personal list of wants while still being within what I wanted to spend. I would have loved the RS5 but I just couldn’t self justify the additional money for so many “upgrades” from my S5 - upgrades that I’m pretty sure I’d never explore (additional HP chief amongst them).
12-25-2018, 09:29 PM
#10
AudiWorld Member
Join Date: Dec 2010
Posts: 100
Likes: 0
Received 0 Likes
on
0 Posts
We toured China with our kids in 2010. We had a good deal of time to talk to our local tour guides in each city. One guide I talked to was totally in love with the BMW Z3. When I explained to him that I bought one used, he had no concept of what that meant. I guess at that time people were buying “first cars” and a used market had not emerged. My wife fist went to China on business in the 90s and I everyone was riding bikes. Well, once a used car market does emerge, that slows down the demand for new cars.