Why Buy? The Chinese sequel

Yesterday’s post profiled (mainly) Indian firms on the prowl for strategic assets in the international arena. The overnight news brings a further example from the other BIG emerging market – China.

Beating fellow vehicle manufacturer Chery to the punch (in terms of picking up some of the wreckage from the collapse of the US auto giants), privately owned Sichuan Tengzhong Heavy Industrial Machinery has scooped up that symbol of US extravagance – Hummer – from GM.

The world’s ugliest faux military SUVs will continue to be produced on US soil for now, but presumably this play is about accessing the underlying technology and production standards (and a recognised, if somewhat tarnished, brand) to fuel Chinese production in the future.

This certainly wont be the last acquisition by cashed up Chinese auto aspirants (Holden, anyone?). This is a buyer’s market for strategic assets.

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Quirky fact – Shift in auto powers continues

Here’s a quirky international business fact from past week: the identity of the world’s largest car market has shifted. No longer is it the US. It is now China.

January vehicle sales were reportedly: China – 790,000 vs US – 657,000.

Of course, this is mainly driven by the plummet in US auto sales (down around 40% year on year and still falling), but nevertheless it demonstrates the ongoing rise of China as a consumer market (as well as the world’s factory).

At the same time, there appears to also be a shakeout within the Chinese market itself, with expectations of considerable consolidation. The Top 10 brands only account for 66% of sales in China, which is probably unsustainable (especially as export markets possibly shrink).

As the WSJ piece argues, this could be just what is needed to spur on the emergence of a clear Chinese car giant in the coming decade.