Tag Archives: Sales

Auto Sales in China: Multiple Players, Multiple Strategies

China, the most populous country in the world, is always a critical market for auto makers. In spite of the fact that its economy is slowing down, many people are still bullish about the potential of auto sales in the country because of the increase of middle class, as well as the government’s goal of boosting domestic consumption for economic growth.

Both domestic and foreign auto makers displayed their latest (probably coolest as well) cars along with gorgeous models to attract potential buyers’ attention at this week’s Beijing auto show, and many of them are really ambitious about their China business. For instance, Toyota Motor Corp., the world’s largest auto maker by sales, aims to take the third spot in the country in terms of market share by bringing 15 new car models to Chinese consumers by 2017 and doubling its sales to two million cars over the long run. Similarly, Volvo Car Corp. said it expects China to overtake the U.S. and become its biggest market this year based on a statement issued Sunday, in which the Swedish company said it sees sales of at least 80,000 in China, up from 61,146 in 2013.

So what kind of strategies are auto makers adopting for sales growth? In my observation, the top three concepts are branding, patriotism, and youth-targeted design.

First, branding is essential for every single auto maker. Most buyers in China are not industry experts and cannot tell the difference between two similar-level cars based on technical factors. Therefore, what really helps a particular auto maker stands out is branding. Simply speaking, manufacturers have to think how to make their cars look both reliable and fancy to consumers, instead of being overwhelmingly focused on technical excellence.

Second, patriotism can be an effective selling point of domestic brands. Makers like Geely Motor Corp. and Great Wall Motor Corp. are trying to persuade buyers, especially those elders, to remain loyalty to Chinese brands. However, I think those domestic manufacturers have to increase quality and enhance industry structure to stimulate sales radically.

Third, youth-targeted design is emerging to be a dominant theme. Unlike many Americans under 30 who are burdened with college debts or wrestling with a sluggish job market, China’s young consumers have “incredible resources”, which is derived from the one-child policy in the country. As a result, many top auto makers like Mercedes-Benz showcased what they described as sport-utility vehicle coupes — SUVs with fast-looking roof lines that look to be borrowed from a sports car to attract young buyers.

In conclusion, I think there is not a best strategy for all auto makers, and they have to target the right buyers based on their unique selling points such as design, price, momentum, etc.

Coca-Cola’s Global Drop in Sales

It has been well-known that the consumption of soda has been linked with numerous adverse health effects: weight gain, poor dental health, diabetes and cardiovascular disease are just to name a few. Despite these known risks, however, Coca-Cola has remained the world’s largest beverage maker, with the average American typically consuming 45 gallons of soda per year. Health experts believe that this excessive consumption of soda in the U.S. has helped to heighten the obesity epidemic, with more than 69% of adults being considered overweight or obese.

With obesity being one of America’s most serious health problems, leading to diabetes and cardiovascular disease which can ultimately lead to heart attacks, it is no wonder why we continue to see an increase in health care spending year after year. “The main thing is excess calories,” says Dr. Christopher Ochner. “If everything else in their diet is equal, a person who has a can of Coke a day adds an extra 14.5 pounds to their weight per year, just from the calories alone.” One of the problems with sugary beverages such as soda is the method of consumption. When you consume a lot of calories through drinking, your body doesn’t register fullness as quickly as it does when you eat; thus leading to overconsumption of drinking.

Due to the overwhelming health effects associated with drinking too much soda, it is recommended that people should drop soda completely from their diet. And, as global sales volume shows, Americans may have started to take this into consideration. For the first time in 15 years, since 1999, Coca-Cola’s global sales dropped by 1%. As more consumers fret about health concerns and competition grows from “healthier” drinks, soda sales are beginning to fall in some of Coke’s largest markets. And, not only that, now Diet Coke, which helped to once offset declines in sales, is also losing drinkers as Americans start to turn away from artificial sweeteners as well. With declining sales, Coca-Cola is facing a tough time trying to meet its long-term goals of a 3-4% beverage volume growth and a 5-6% annual revenue growth.

But this setback is not putting a damper on the company. Coca-Cola is fully confident that growth rates will return to positive numbers again. Coke said in February that it would increase its advertising budget by $1 billion over the next three years, from $3.3 billion in 2013. But will advertising be the solution to their decline in sales or will Americans continue to shift their drinking habits away from this carbonated drink? As more and more people become aware of the importance of living a healthy life, Coca-Cola very well may continue to see declines in sales in the quarters to come.

Auto Sales Not so Strong

With the recent end to the first month of 2014, the monthly auto sales released were not as promising as hoped. Executives in the industry blamed the extreme weather, notably the “polar-vortex”, for keeping customers off lots and slowing sales in January. Auto executives seem optimistic that sales will return to normal in the following months and the upward trend of sales will continue. The weak month did however lower the yearly estimates, looking to be flat from last year to this. The flat projections by analysts will likely hurt the stocks of two of the “Big Three” american automotive manufacturers that are publicly traded (Ford and GM). Oddly, the one manufacturer that showed an increase in sales from January of 2013 to January of 2014 was Chrysler, the only of the “Big Three” that is not currently publicly traded.

It seems reasonable that auto execs would blame the bad month in sales on the cold weather and predict to bounce back in the coming months. But is it possible that the Feds quantitative easing strategy and the rising interest rates, will prove analysts predictions wrong and actually result in an over decline in auto sales from 2013 to 2014? And will a decline in sales, cripple the publicly traded companies and return them to the state they were in during the recession?

Although the interest rates on thirty year mortgages are expected to increase by almost one percent in 2014 it is unlikely that the auto sales will see a negative impact from this bump. Auto loans are short term loans and the Fed has currently not planned to increase the interest rates on these types of loans. Some predict in the coming years, possibly as soon as 2015, if the economy continues to improve, they Fed will start increasing the interest rates on short term loans. When this happens, automotive executives, as well as industry analysts may want to start to worry, or at least slow down the predictions on sales growth.

So back to the question states earlier, it is unlikely that sales in 2014 will see a decline from the previous year due to the Feds quantitative easing strategy. This should be good news the automotive industry and their performance in the stock market. Although, the current outlook is flat or no growth year over year, the best months for auto sales are usually in the late summer, the month of August to be exact. With the trend of automotive manufacturers releasing new models, I personally think sales will grow in the coming months. This should lead to improved forecasts and keep stocks from diving. I don’t think automotive agencies have much of a reason to worry from the one month of slow sales.