German automakers fear Chinese woes, but future still looks bright image

German carmakers have been turned down lately by investors fearing their future woes on the lucrative Chinese market, but certain recent reports might rekindle their interest.

German premium carmakers BMW, Mercedes and the Volkswagen Group have been growing weary of their future outlook for the Chinese market, the largest in the world, but the recent reports show their issues could be bigger than in reality and their medium to long term prospects still look strong. Truth be told, the days when China was an avenue for the German automakers to see rising stockpiles of money do look ready to go into distant memory. The Global Automotive Outlook made by Alix Partners sees China’s world market share growing from 23.6 percent last year to 32.6 percent in 2022 – the gain rates are indeed slowing, but since its figures are massive they still amount to a healthier perspective compared to other large markets such as western Europe or the US. IHS Automotive paints a similar picture, with deliveries soaring to 30 million vehicles in 2020 – jumping 30 percent from the 23.1 million figure of 2014.

Investors are worried about the prospects of profits from the German automakers because Mercedes relies on China for around 20 to 25 percent of earnings, BMW for 35 to 40 percent and VW AG falling somewhere in the middle. But nuances could be made – even though luxury car sales slid in May in China, the rate of owning a premium model in the country is far below the one encountered in more mature markets, such as the United States.

Via Forbes