Chinese using carpooling apps to get ride home for holidays

The Associated Press, February 5, 2016

Chinese using carpooling apps to get ride home for holidays Google Chrome, Today at 4.24.12 PM

In this Feb. 2, 2016 photo, real estate agent Chen Xiao, top center in white, poses with passengers from left top, He Shaolei, Han Ajuan, Han’s son Miao Ruijing, Zhang Tao and Li Jin before they start their journey back to their hometown for the upcoming Chinese Lunar New Year, in Shanghai, China. They met on the ride-share app of Didi Chuxing, an Uber-like mobile car-hailing service. Carpooling is still unusual in China, but government officials welcome the idea as a way to alleviate the enormous burden placed on the public transportation system during the Lunar New Year holidays, China’s most important vacation period when hundreds of millions travel to their hometowns. Three others in bottom are another group, from left, Zhang Xiaohui, Yang Chuang and Xu Peng. (AP Photo/Paul Traynor)

 

SHANGHAI (AP) — The hundreds of millions of Chinese heading home for Lunar New Year have a relatively new travel option this year: mobile apps to find carpool partners to share costs in what is a novel concept for most Chinese.

The apps give an alternative to pricey airfares and hard-to-score train tickets. Software developer Li Jin in Shanghai used one after he had to abort his flight plans because of last-minute work demands, and found that the only train tickets left going to his hometown in northwestern Shaanxi province were for expensive business-class seats.

Then he tried using the Didi Chuxing (pronounced “dee dee choo shing”) carpool app and found a driver, real estate agent Chen Xiao, going his way.

“She said she still had a free space, so we agreed and now I’m using this way to get home,” Li said.

Li paid Chen 400 yuan ($60) for his seat home, roughly the same cost for a second-class train ticket for the same journey. He shared the ride in a BMW sedan with three other passengers, including a child.

The road trip through clogged highways was nearly 23 hours, twice the travel time of an express train, but Li said he appreciated the companionship.

“I think I will do the same for my return trip after the new year, because I get to know new friends, and it’s an experience,” he said.

Carpooling is still unusual in China, but government officials welcome the idea as a way to alleviate the enormous burden placed on the public transportation system during the Lunar New Year holidays, China’s most important vacation period when hundreds of millions travel to their hometowns. All told, Chinese will make a total of 2.9 billion trips this holiday season, and 2.5 billion of them will be by road, according to official estimates.

“We encourage car-pooling services that are not intended to make profits,” transportation official Wang Shuiping was quoted as saying by state media outlets. “We also remind that parties to the services must be clear on each side’s rights and obligations to avoid disputes.”

Leading the nascent inter-city carpooling market is Didi Chuxing, an Uber-like mobile car-hailing service that has been most commonly used for hailing city rides, but the company began to offer carpooling services for city commuters over the past year and, by the end of September, introduced car-sharing services for inter-city trips among 343 Chinese cities.

Users can pick the departure city and destination city and enter the desired date of travel to find private drivers with the same itinerary and an empty seat.

“We launched this matchmaking function to help us make this inter-city car sharing service another means of transportation alongside planes, trains and other forms of public transport,” Didi Chuxing spokesman Wang Mingze said.

Wang said 300,000 used the service in the first of week of the holiday travel, which began Jan. 24. As the Feb. 8 start of the holiday drew closer, the usage jumped to 100,000 per day, and nearly half of the orders involved trips longer than 500 kilometers (310 miles), he said.

Wang estimated that the platform would serve more than 1 million people by the end of the 40-day travel period.

Another player in the market is 58 Ganji Group, China’s largest online classified ad service, where users have been for years posting carpooling information and which also now has a mobile app. Huang Wei, a vice president, said the site expects to have more than 1 million posts for carpooling this holiday season, up from last year’s 700,000 posts, although the company does not track the completion rates.

“China does not have a carpooling culture yet, but you see a spike during the holiday season, when the demand goes up because people cannot secure train tickets and seek alternatives,” Huang said.

He said the routes posted in online classified ads conform to the migration patterns in China, where migrant workers flow from inner provinces to the more prosperous coastal provinces for work.

Didi Chuxing says it has purchased insurance for its users.

Bill Russo, an auto industry analyst at Gao Feng Advisory Company in Shanghai, said the app is another example how the technology is empowering the public. “It’s growing even more popular as an alternative to individual car ownership or public transportation.”

Premium carmakers see China drama ahead

The Financial Times, August 30, 2015

Click here to read this article at FT.com

by Andy Sharman, Motor Industry Correspondent

China’s stock market crash this week brought a jolting end to an uncomfortable summer for most of the world’s carmakers, who in past years had enjoyed a smooth ride in the industry’s most profitable market.

For the luxury marques, though, the pain had begun a while back.

A crackdown on ostentatious consumption had threatened to depress sales for the likes of Bentley and Rolls-Royce, ever since Chinese president Xi Jinping launched his anti-corruption campaign in 2013.

This year, the impact has started to show. “Everyone’s really hurting,” says one executive at a luxury carmaker.

A combination of a slowing economy, restrictions on registration plates in larger cities to ease congestion, and increasing consumer appetite for domestic brands — all against the backdrop of the anti-corruption drive — have created a difficult environment for western manufacturers.

“All of these factors have a more direct correlation to sales than a volatile stock market,” says Bill Russo, a Shanghai-based consultant.

Even so, the sudden deceleration in Chinese car sales came as a surprise to some — not least when sales went into reverse in recent months. In July, car sales fell for a second consecutive month, by 6.6 per cent, according to the China Association of Automobile Manufacturers.

Some analysts believe that the scale of the decline is such that multinational manufacturers such as Volkswagen and BMW — respectively the parent companies of Bentley and Rolls-Royce — will be forced to warn on profits in the coming weeks.

“Please keep in mind that we still have some drama ahead of us,” says Max Warburton, an analyst at Bernstein Research.

It amounts to a startling turn in fortunes for the car industry.

But registrations of luxury and ultra-luxury vehicles were down almost 10 per cent year-on-year in the first six months of 2015, based on figures from Bernstein Research.

devaluation of the Chinese currency has not helped, making already expensive European cars even more so.

This has taken a heavy toll on exports of British-made models. Bentley, which counts China as its second-biggest market, reported worldwide first-half sales down almost 12 per cent to 4,600 units. It was a similar story at Rolls-Royce, for which global deliveries fell 10 per cent to about 2,000 cars in the first half. Neither manufacturer breaks out six-month sales by country, but domestic peer Jaguar Land Rover offered a window to the state of the world’s largest car market: sales in China were down 27 per cent in the first half.

Not all luxury car brands have suffered such declines. Porsche, maker of the Cayenne sport utility vehicle, reported sales up 48 per cent in the first half of the year.

But volumes to not tell the full story. China’s economic headwinds have already created what analysts describe as a “hyper-competitive” market. Porsche has admitted that dealers, independent of the company, have been cutting the price of its Panamera sports car by as much as 20 per cent. Chinese pricing website Bitauto also carries examples of Bentley Flying Spurs and Rolls-Royce Wraiths discounted by a similar percentage.

To put that in context, in the past, western luxury cars typically sold at a premium to their list prices in China.

For some companies, this turnround is already having an effect. China accounts for more than 60 per cent of JLR’s earnings before interest, tax, depreciation and amortisation, according to Bernstein — and the country’s slowdown has caused net income to almost halve at parent company Tata Motors. Similarly, Bentley’s operating profit fell from €95m to €54m in the first half.

Both companies, however — having ridden the tide of rising wealth in China for several years — are outwardly calm.

“Don’t worry,” said Wolfgang Dürheimer, Bentley chief executive, speaking to the FT last month. “Of course we need to take the slowdown of the market seriously but . . . I strongly believe in the Chinese market. There are some changes going on at present, but on the long-term view it will be a very profitable basis for us.”

Industry executives point to low car density — less than one in 10 people drive in China — and a still growing middle class as growth opportunities. Bentley and Rolls-Royce, for example, plan to launch SUVs — increasingly the vehicle of choice in China — over the next two years.

Amid the turmoil this week came another cause for optimism. Alongside the interest-rate cut announced on Tuesday by the China’s central bank was a targeted intervention in the car industry: the country reduced by 300 basis points the reserve ratio required to be held by auto financing and leasing companies, potentially increasing the funds available to car buyers in the country.

It seemed to suggest that China was committed to supporting car sales. But with two-thirds of premium auto purchases still made in cash, the impact may initially prove limited.

China car market braced for abnormal era of flat sales

The Financial Times, July 27, 2015

China car market braced for abnormal era of flat sales - FT.com Mail, Today at 6.03.00 PM

On the eve of China’s largest car show in April, executives and analysts braced themselves for a “new normal”: single-digit sales growth after two fat years. Yet some are beginning to wonder if the world’s largest car market is actually entering an abnormal era of flat or even falling sales.

The catalyst for this pessimism was a sharp fall-off in year-on-year sales — 9.4 per cent higher in March, but 3.4 per cent lower by June than the same month last year, according to wholesale figures compiled by the China Association of Automobile Manufacturers. It was the industry’s first decline since early 2013.

Coupled with an economy growing at its slowest annual rate in 25 years and the recent crisis in China’s stock markets, the outlook appears bleak for an industry that has been a cash cow for mass market and premium car brands for the past five years.

“It will be quite challenging for carmakers because the market is cooling and the trend will not be reversed anytime soon,” says Teng Bingsheng, a professor at the Cheung Kong Graduate School of Business in Beijing.

Analysts at Barclays recently revised their 2015 outlook for passenger car sales growth sharply downward, from 8.5 per cent to 1.7 per cent.

Bernstein Research warned that “we’ll need a stronger word than ‘moderation’ to describe the industry’s challenges”.

Marques as diverse as BMW and Volkswagen have reported falling sales. VW experienced a 3.9 per cent fall in first-half group sales to 1.7m units — the first decline in nine years. BMW also caved in to dealer demands for bigger subsidies — a concession since made by others — while its Chinese joint venture partner issued a profit warning on July 13.

For VW, the pain is exacerbated by having just one mass-market SUV on offer in China at a time when the fast-growing segment accounts for one-third of all passenger car sales.

“That’s clearly been a huge miss on their part,” says Janet Lewis, analyst at Macquarie in Hong Kong. “A lot of first-time buyers are in central and western China where road quality is not as good and there’s more focus on the higher ride that you get with an SUV.”

GM, however, bucked the trend with a 2.6 per cent rise in first-half China sales, helping to send its shares up more than 4 per cent after it reported second-quarter earnings on Thursday.

The US automaker bolstered the view of analysts who say China’s car industry is simply maturing, with growth shifting to smaller cities in the country’s vast interior and increasingly driven by new model launches. The market is merely becoming more competitive with lower profit margins, more in line with those in the US and Europe.

China car market braced for abnormal era of flat sales - FT.com Mail, Today at 6.04.46 PM

“It’s easy to be pessimistic when you start to see some year-on-year developments that are negative,” says Bill Russo, a Shanghai-based consultant who notes that car sales also grew less than 5 per cent in China in 2011 and 2012. “But we went through a softening a few years back and I remember having similar conversations about whether this was the big down cycle. It wasn’t.”

“Supply has caught up to demand,” he adds. “[Companies] are going to be giving away some of those very good margins they have enjoyed for quite a long time.”

That may squeeze shareholder payouts too. VW, for example, has seen an almost eightfold increase in the annual dividend it receives from its China joint ventures over the past five years, from €400m in 2009 to €3bn last year

China car market braced for abnormal era of flat sales - FT.com Mail, Today at 6.06.25 PM

Mr Russo’s less gloomy big picture is also supported by basic demographics, with only 52 passenger vehicles per 1,000 people compared with a global average of 150.

Incomes are improving too. According to GaveKal Dragonomics, a Beijing consultancy, the annual income of some 15m Chinese households will exceed $20,500 this year for the first time. Another 19m households will break through the $13,500 level.

As a result, Macquarie has adjusted its 2015 China car sales forecast only moderately, projecting an increase of 10 per cent from 7 per cent previously, and thinks the overall market will grow from 19.7m units last year to at least 32m by 2020.

But as competition intensifies, the biggest rewards will flow to the most cost-efficient carmakers with the quickest model cycles — just as they do in other markets. “It’s harder to sell something that’s older in China, particularly if people know the next model is coming,” says Ms Lewis.

Chinese brands regain market share
July began as June ended for the likes of BMW and Volkswagen, according to analysts at Bernstein Research, with falling year-on-year sales for the two German groups as well as General Motors and Ford’s China joint ventures.

Unexpectedly, traditional laggards including Mercedes-Benz and Japan’s ‘big three’ automakers have been reclaiming market share.

Chinese brands have also seen their share of total sales — currently 41.5 per cent — start to grow again after four consecutive annual declines.

BAIC Motor, Daimler’s main China joint venture partner, is planning on a 29 per cent increase in sales of its own brand cars this year, to 400,000 units. “Our domestic brand business is growing substantially and has exceeded our expectations,” Xu Heyi, BAIC chairman, said last week.

In one sense, Chinese brands simply endured their “correction” a year early, after experiencing steep year-on-year declines in 2014. Like the Japanese companies, whose sales were affected by spats between Beijing and Tokyo in 2012 and 2013, they are improving from a low base.

Mercedes, meanwhile, is reaping the fruits of a restructuring begun two years ago by Hubertus Troska, the China head of its Daimler parent unit, as it begins to catch up with traditional leaders Audi and BMW. Mr Troska’s changes unified a fragmented sales and marketing structure, bringing together separate channels for imported and domestically produced vehicles.

On Thursday, Daimler reported better than expected second-quarter results with an underlying margin of 10.7 per cent. “Mercedes now looks to be the most profitable of the ‘big three’ German premium brands, something inconceivable a few years ago,” said Bernstein’s Max Warburton in a research note. “Daimler management . . . must feel vindicated and delighted.”

Mercedes is also benefiting from a series of new product launches at a time when refreshing the model line-up is becoming essential in the world’s largest car market.

Macquarie’s Ms Lewis says the German company is in “about the sixth inning” of a strong new product cycle in China, with new GLC SUV and E-class sedans in its pipeline.

“Products tend to have a very short life cycle in China,” adds Mr Russo. “If it didn’t launch in the past 18 months, it’s unlikely to be hot. You’ve got to rake it in while you can.”

Additional reporting by Wan Li

Click here to read this at FT.com

Panel Discussion on Connected Mobility at GSMA Mobile World Congress

Shanghai, China, July 17, 2015

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An interactive discussion on connected cars, focusing on the following questions:

  • How will smart devices and the Internet of Things impact the automotive industry in the next decade?
  • Will China play a significant role in accelerating the commercialization of connected car technologies?
  • How will the OEM and supplier landscape shift in this new ecosystem? What type of non-traditional new entrants to the connected automobile space do you foresee?
  • Will companies of different types, i.e. OEM and Internet companies begin developing new products together? What are your views on this?
  • How does China’s digital ecosystem vary compared to western counterparts?
  • What is a smart/connected car in terms of features and functions?

Panelists:

  • Juergen Bauer, Project Manager, Audi-Tongji Lab
  • Tim Shih, Senior Manager Design, R&D, BMW-Brilliance Auto
  • Bill Russo, Managing Director, Gao Feng Advisory Company, Ltd.

 

Bill Russo Chairs Auto Panel Discussion at J.P. Morgan Global China Summit

Beijing, China. June 3, 2015

Bill Russo chaired a panel discussion with the the China CEOs from the top 3 premium carmakers at the 2015 J.P. Morgan Global China Summit.  The topic of the session was The Next Golden Age of China’s Automotive Industry.

Day 2 - Plenary - The Next Golden Age of China's Automotive Industry Safari, Today at 4.52.48 PM

Panelists:

  • Hubertus Troska, Member of the Board of Management, Daimler AG; Chairman & CEO, Daimler Greater China
  • Karsten Engel, President and CEO, BMW Group China
  • Dietmar Voggenreiter, President, Audi China
  • Chair: Bill Russo, Managing Director, Gao Feng Advisory

Click here to watch the video recording of the panel discussion

Click here to see the introductory slides

Foreign marques surge ahead in China car market

The Financial Times, January 13, 2015

by Tom Mitchell

Multinational carmakers defied slowing economic growth in China last year, increasing their lead over Chinese rivals in the world’s largest automotive market.

Sales of passenger cars, SUVs and minivans increased 9.9 per cent year-on-year to 19.7m units in 2014, the Chinese Association of Automobile Manufacturers said on Monday. That was significantly below the 16 per cent annual growth recorded in 2013, when 10 times more cars were sold in China than in India.

Overall vehicle sales, including buses and trucks, increased 6.9 per cent to 23.5m units. CAAM projected the market would grow 7 per cent this year, to more than 25m vehicles.

Chinese carmakers have blamed a broader slowdown in the world’s second-largest economy for their own poor sales performance last year. In October, the government reported its slowest quarterly economic growth figure — of 7.3 per cent — in more than five years.

Sales of Chinese passenger sedans fell more than 17 per cent last year, leaving domestic brands with a market share of just 22 per cent in the segment, compared with a 27 per cent share for German brands.

Dong Yang, CAAM secretary-general, said Chinese drivers did not appreciate the improvements made by domestic brands this year. “They improved their products and reduced their prices,” Mr Dong said. “But Chinese people care too much about [the cache of foreign] brands. I think this trend will continue in 2015.”

Dealers on the mainland for some of the world’s most best-known car companies, such as BMW, have also cited slowing economic growth in their successful negotiations for bigger rebates and more modest sales targets.

But some analysts argue that their complaints are overdone as the overall sales figures mask a large and growing discrepancy between local and foreign brands, with the latter continuing to enjoy double-digit annual sales growth.

“We’ve got a market that’s 24m units in size and is growing at 7 per cent — we should be celebrating not lamenting,” said Bill Russo, a Shanghai-based automotive analyst. “The issue is that most of the growth is captured by foreign manufacturers while local players are fighting at the bottom of the pyramid.”

“Five per cent growth anywhere else in the world is considered great,” he added. “But here we complain about anything less than double-digit growth. In a market this big, that’s crazy.”

Volkswagen reported at the weekend that its sales in China increased 12.4 per cent to 3.67m units, accounting for almost 40 per cent of its global total.

On Monday, Jaguar Land Rover of the UK said that it had recorded a 28 per cent annual surge in China, its largest market, compared with a 9 per cent increase in overall sales. Owned by India’s Tata Motors, JLR opened its first manufacturing facility in China in October as it races to catch up with VW unit Audi, BMW and Daimler’s Mercedes-Benz, which together account for about 80 per cent of premium vehicle sales in China.

The Chinese government forces overseas car companies to operate joint ventures if they want to manufacture locally. Most have linked with large state-owned auto groups, which reap a steady flow of dividends from the partnerships but have failed to develop strong brands of their own.

Click here to read this article at FT.com

 

Hunting for deals on wheels in China’s developing used car market

Nikkei Asian Review. September 11, 2014

SHANGHAI — Zhu Xiaohong closely examines a 4-year-old Volkswagen Touran, using the flashlight on his mobile phone. The gray VW sits in what looks like a multistory parking lot but is in fact the Shanghai Used Car Trade Market, the largest of a cluster of secondhand dealers on the city’s Zhongshan North Road.

Zhu’s conclusion: “I want to buy this car.”

Zhu, who has bought used cars twice before, said he cannot afford to buy new. But while used cars are significantly cheaper than new ones in China, prices are higher than in developed overseas markets, and there is often greater uncertainty about quality.

Yasuhiro Konta, a senior manager responsible for secondhand sales at Dongfeng Nissan Passenger Vehicle, explained that it is rare to see a standard going rate for a used car in China. “Each price is decided by negotiation,” he said.

This informal system reduces the pressure on sellers to keep prices down, according to Cameron Macqueen, general manager of Southern Cross Warranty, the Chinese arm of Australian financial company Presidian.

“Pricing in China is a lot higher than in the U.S. or Australia — maybe up to 30% or more for some makes and models,” Macqueen said. He estimated average secondhand sale prices at 60,000 yuan ($9,770) nationally, but added that the figure rises to 200,000 yuan in big cities such as Shanghai, where top-end luxury cars are popular.

Trust issues

China’s used car market has expanded alongside a dramatic rise in demand for new cars. Sales of new passenger vehicles hit 17.92 million in 2013, according to Deloitte’s 2014 China Auto Finance Report, confirming China’s status as the world’s largest car market.

Bill Russo, managing director of consultancy Gao Feng Advisory, said the supply of used cars is increasing as owners sell into the market rather than handing on vehicles to other family members. Demand, Russo said, is picking up as younger drivers become more comfortable buying preowned.

On the other hand, Russo pointed out that the ratio of secondhand sales to new car sales is much lower in China than overseas, suggesting that there is a lot of room for growth. In the U.S., three used cars are sold for every new car purchased, whereas in China only one used vehicle is sold for every four new ones.

While those numbers could change, the used car market faces considerable challenges. For a start, growth in new car sales appears to be slowing, although it is still high by Western standards. Deloitte, which tracks the industry closely, says it expects annual growth in China’s new passenger car sales to fall from 15% in 2013 to 7% over the next few years, with the expansion of the used car market slowing from around 20% a year to 15%.

Used car sales are also hampered by a lack of transparent vehicle records, which often makes buying a matter of chance. Sometimes, sellers cross the line into outright fraud.

“I would say the majority of cars have their odometer wound back, and therefore credibility issues are rife,” Macqueen said. “Chinese are not yet up to speed with how to look after their cars, so it is normal for a customer not to trust the history, the quality, of the car they’re looking at, or the dealer.”

Turning pro

The hit-and-miss nature of the used car market reflects the dominance of independent dealers and brokers.

Wang Meimei’s corner of the Shanghai Used Car Trade Market is taken up by a BMW, a Mercedes-Benz and a Volkswagen Passat. “Sometimes I sell a car a day, sometimes a car a week. It varies,” said Wang, who is preparing to retire after 10 years on Zhongshan North Road.

The market is changing, however. Alibaba Group, China’s largest e-commerce company, recently announced plans to launch a platform for selling used cars online. Conventional dealers are also beginning to offer warranties on preowned vehicles, prodded by companies such as Southern Cross.

New car dealers, known in China as 4S shops, are increasingly moving into the secondhand business, bringing more professional marketing and sales techniques.

Martin Kuehl, a spokesman for Audi China, said the company expects the preowned market to continue to grow and has set up 290 licensed used car dealerships — including 60 that sell only Audis. Dongfeng Nissan began selling used cars at some of its 4S shops five years ago; last year it sold around 20,000 through more than 60 dealers.

New government regulations that take effect in October are likely to accelerate the trend toward greater professionalism. Authorized dealerships will be free to sell a range of brands, rather than being tied to a single marque. Industry experts say this will give a further boost to the better-run 4S shops, whose more transparent pricing and marketing practices are likely to put pressure on independents to raise their standards.

 

Potential buyers check out vehicles at the Shanghai Used Car Trade Market. Preowned cars tend to be pricier in China than in other major countries. © Photo by Mark Andrews

“I see a trend toward businesses who want to build a brand name — meaning the quality dealers are getting more and more business,” Macqueen said.

Some problems will remain, though. Many cities, including Beijing and Shanghai, have implemented measures to try to limit car numbers, usually by restricting the supply of license plates. Many of the cars on sale at Zhongshan North Road carry suburban “Hu C” plates, which do not allow the vehicles to be driven into the city center.

Emission standards also vary between cities and provinces, hampering the creation of a national market, or even of large regional markets.

When a new Ford Fiesta was introduced to China in 2009, models sold in Beijing and Shanghai were compliant with the fourth-generation national emission standard, equivalent to the European Union’s Euro IV standard. Models destined for other parts of the country met only the older China III standard.

Today, registering a China III car is difficult nationwide. As a result, those Fiestas are hard to sell.

Click here to read the article at Nikkei Asian Review